united for growth · our shareholders, and growing our staff in knowledge and skills. these four...

HEAD OFFICE

80 Raffles Place

UOB Plaza

Singapore 048624

Telephone (65) 6533 9898

Facsimile (65) 6534 2334

Website www.uobgroup.com

United fo r Growth

A N N U A L R E P O RT 2 0 0 2

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Contents

Our Mission 1

Brief Profile 2

Performance in Brief 3

Chairman’s Statement 4

Financial Highlights 7

Corporate Information 11

Board of Directors 12

Principal Officers 16

Corporate Governance 18

Risk Management 25

2002 in Review 50

Group Financial Review 62

Financial Statements 76

Subsidiaries 162

Major Associates 168

Investor Reference 169

Our International Network 179

Notice of Annual General Meeting 184

Proxy Form

All figures in this Annual Report are in Singapore dollars unless otherwise specified.

United fo r Growth

With the successful integration of Overseas Union Bank in 2002, we have taken another important step

towards our growth in Singapore and the region. Looking ahead, we will continue to actively grow the

Bank – by growing our customers' wealth, growing our portfolio of products, growing the returns to

our shareholders, and growing our staff in knowledge and skills. These four constituent components

of our growth, like ripples in a pond moving outward in an ever-growing circle, will propel us to be a

premier bank in the Asia-Pacific.

Design and production by Citigate Su Yeang Design Pte Ltd • Printing by UIC Printing and Packaging Pte Ltd

UNITED OVERSEAS BANK 1

Singapore 62

Philippines 67

Malaysia 39

Thailand 37

Indonesia 11

China 8

Hong Kong S.A.R. 6

USA 4

Taiwan 3

Australia 2

Brunei 2

Canada 1

France 1

Japan 1

Myanmar 1

South Korea 1

United Kingdom 1

Vietnam 1

Our MissionTo be a premier bank in the Asia-Pacific region,committed to providing quality products andexcellent customer service.

248 offices around the world

2

Brief Profile

United Overseas Bank (UOB) is a leading bank in Singapore with aninternational network that comprises 248 offices in 18 countries andterritories in the Asia-Pacific region, Western Europe and North America.

It has a banking subsidiary, Far Eastern Bank, in Singapore, while itsbanking subsidiaries in the region are United Overseas Bank (Malaysia),PT Bank UOB Indonesia, UOB Radanasin Bank in Thailand and UnitedOverseas Bank Philippines.

UOB provides a wide range of financial services through its global networkof branches, offices and subsidiaries: personal financial services, privatebanking, trust services, commercial and corporate banking, corporatefinance, capital market activities, treasury services, asset management,venture capital management, proprietary investments, general insuranceand life assurance. It also offers stockbroking services through its associate,UOB-Kay Hian Holdings.

UOB's total card base of more than 1 million firmly places it in the topposition in credit and Visa debit cards in Singapore. UOB is also the marketleader in loans to small and medium-sized enterprises and a recognisedleader in the personal loans business.

Through its other subsidiaries and associates (principally the UnitedOverseas Land Group), UOB also has diversified interests in travel, leasing,property development and management, hotel operations and generaltrading.

UOB is rated among the world's top banks by Moody's Investors Service,receiving B+ for Bank Financial Strength, and Aa2 and Prime-1 for long-term and short-term deposits respectively.

Performance in Brief

2002 2001 Increase/ Decrease

Profit For The Year ($'000)

Profit before tax 1,433,570 1,197,562 19.7%

Net profit after tax 1,064,200 924,579 15.1%

Selected Balance Sheet ItemsAs At Year-End ($'000)

Customer loans (net of provisions) 58,884,007 60,892,094 - 3.3%

Customer deposits 67,918,581 74,451,684 - 8.8%

Total assets 107,469,421 113,888,094 - 5.6%

Shareholders' funds 12,652,638 12,716,839 - 0.5%

Financial Ratios

Basic earnings per share (cents) 67.7 77.3 - 12.4%

Return on average shareholders' funds (%) 8.3 10.8 - 2.5% points

Return on average total assets (%) 0.98 1.16 - 0.18% point

Expense to income ratio (%) 34.9 39.3 - 4.4% points

Dividend rates (%)– Interim and final 58.8 40.0 18.8% points

Net asset value per share ($) 8.05 8.09 - 0.5%

Capital adequacy ratios (BIS) (%)– Tier 1 capital 12.2 11.8 0.4% point– Total capital 15.3 18.5 - 3.2% points


The Group

4

Chairman's Statement

Wee Cho YawChairman & Chief Executive Officer

Growing our Regional Business

2002 Review

Contrary to general expectations, the second half of 2002 did not witness a dramatic

improvement in the world economy. Weighed down by accounting scandals in the US

and, to a lesser extent, Europe, and the threat of a war in Iraq, the world economy

moved at a sluggish pace. The bombs set off by terrorists in Bali in October cast a further

pall on the regional economies.

Singapore's electronic exports were hard hit, as was the property market. Consequently,

the Singapore economy only grew by 2% against earlier estimates of up to 5% growth.

The UOB Group and the Bank were affected by the slower growth. We were, however,

able to achieve UOB's integration with Overseas Union Bank (OUB) in June, way ahead

of schedule, and hence we were able to enjoy the benefits of the business synergies

much sooner.

2002 Performance and Dividend

Bolstered by the business synergies arising from our acquisition of OUB, the UOB Group

achieved an After-Tax Profit of $1.064 billion in 2002, representing an increase of 15.1%

over 2001. Return on average shareholders' funds (ROE) decreased from 10.8% to

8.3%, and basic earnings per share dropped from 77.3 cents to 67.7 cents.

As at 31 December, the Group had total assets of $107.5 billion, down from

$113.9 billion at the end of 2001. Reflecting the sluggish business environment, loans

outstanding dropped slightly from $60.9 billion to $58.9 billion. Non-bank deposits also

dropped from $74.5 billion to $67.9 billion. Non-Performing Loans (NPLs) also decreased

from $6.0 billion to $5.7 billion, while total cumulative specific and general provisions

increased from $3.3 billion to $3.5 billion.


Profit growth was derived mainly from higher net interest

income, higher fee and commission income, gains from the

divestment by distribution in specie of its Haw Par

Corporation shares as well as higher contributions from

associates. These were offset by lower dealing income,

higher operating expenses, higher goodwill amortisation

charges and higher specific provision for loans.

Because of its smaller size, Far Eastern Bank continued to

face intense competition in 2002. After-Tax Profit fell slightly,

from $7.9 million to $7.6 million. The year was a difficult

one for the insurance industry as a result of the terrorist

attacks and the poor investment climate. Our subsidiary,

United Overseas Insurance, was also affected and its After-

Tax Profit declined from $9.9 million to $6.3 million.

Among our regional banking subsidiaries, United Overseas

Bank (Malaysia) [UOBM] achieved a 117% jump in profit

to $146.5 million. This was, in part, attributable to the

strong economic rebound in Malaysia and, in part, due to

the successful integration of UOBM with Overseas Union

Bank (Malaysia). UOB Radanasin Bank also benefited from

the robust growth of Thai exports and its consumer banking

portfolio. It managed to reduce its loss from $28 million to

$7.8 million. Reflecting the slow progress of the Indonesian

economy, PT Bank UOB Indonesia saw a slight increase in

its After-Tax Profit to $15.1 million. United Overseas Bank

Philippines reported a loss of $34 million, compared with

a loss of $34.7 million the previous year.

The UOB Board proposes that $400 million be transferred

to reserves, and recommends a final dividend of 25% less

22% income tax. Together with the interim dividend of

15%, and the interim dividend of 18.8% paid in specie of

shares in Haw Par Corporation, the total dividend for 2002

is 58.8%.

Corporate Developments

The year under review saw several major corporate

developments.

On 16 June, all systems of the former OUB were successfully

integrated with UOB's. Customers of the combined Bank

were thus able to enjoy seamless transactions and a wider

range of products and services. Thanks to the work put in

by management and staff, integration was achieved

within eight months instead of the originally estimated 12

to 18 months.

On 3 June, Industrial & Commercial Bank (ICB) was delisted

from the Singapore Exchange following UOB's acquisition

of all the shares of the subsidiary. On 28 August, ICB was

effectively merged with UOB. The consolidation of ICB will

further improve the efficient use of our resources.

In July, UOB acquired the remaining 40% shares of United

Overseas Bank Philippines, making the Filipino bank a 100%

owned subsidiary.

In September, UOB acquired 9,550 shares representing

19.1% of the issued and paid-up capital of PT Bank UOB

Indonesia. After the acquisition, UOB's equity interest in

PT Bank UOB Indonesia was raised to 99%.

In November, UOBM formed a life and general insurance

joint venture with the DRB-HICOM Group to grow our

bancassurance business in Malaysia.

In December, UOB distributed, in specie, 64,251,957 ordinary

shares of Haw Par Corporation, representing 31.12% of the

issued share capital of the company held by the Bank, to

UOB shareholders. For every 1,000 UOB shares, the UOB

shareholder received 40.88 Haw Par Corporation shares.

The divestment was in compliance with the Monetary

Authority of Singapore's requirement for financial institutions

to reduce their shareholding in non-financial companies to

not more than 10% of the companies' issued share capital

by July 2004.

On 19 December, UOB's scheme of arrangement to

reorganise the share capital of its finance company, Overseas

Union Trust (OUT), was effected and the company became

a fully-owned subsidiary of UOB. OUT's shares were delisted

on the following day.

6

Chairman's Statement

In line with our strategy to expand our business activities in

Greater China, our Representative Office in Beijing was

upgraded to a full branch in November. During the year,

our Shenzhen Branch was granted a licence to conduct

Renminbi transactions for foreign companies and nationals,

while our Shanghai Branch was licensed to offer foreign

currency services to local companies and individuals in China.

UOB Shanghai Branch is also an Authorised Approving

Centre for capital accounts, making UOB the first South-

East Asian bank to handle such capital account transactions

in Shanghai.

During the year, we also established a RMB300 million

investment company in Beijing with the Oxford Cambridge

Investment Group and Shandong Hi-Tech Investment

Company Limited, and launched the UOB Credit Card in

Hong Kong S.A.R.

At home, we continued to build up our IT infrastructure

and rationalise our branch operations to further

upgrade our customer service. The newly established

Operations Sector has also achieved significant progress

in implementing straight-through processing for the

convenience of customers.

2003 Prospects

The 2003 business climate is clouded with uncertainties.

The war in Iraq and its aftermath will have a significant

impact on the world economy.

In Singapore, the official estimate is a growth of between

2% to 5%, the wide variation being a reflection of the

uncertain outlook. UOB believes that growth will be

closer to the lower end of the estimate. The industrial and

commercial property market is expected to continue to

be weak, and Singapore's high unemployment rate is likely

to remain as the economy goes through a restructuring

exercise. The tourism industry has been dealt a double blow

with the war in Iraq and the outbreak of the Severe Acute

Respiratory Syndrome in March.

Under the circumstances, the Group will focus on growing

our regional business even as we strive to maintain our

leading position in Singapore. Our enlarged UOBM

should see continued expansion in its corporate and

consumer business as the Malaysian economy strengthens.

UOB Radanasin Bank is expected to become profitable and

United Overseas Bank Philippines intends to increase its

business activities this year.

In China, we intend to look for a suitable financial institution

to form a strategic alliance. In connection with this, we

have held talks with several Chinese banks. Our strategy in

Greater China is two-pronged. We intend to add depth and

breadth to our scope of business activities and services, and

we will continue to use our resources to assist our Singapore

and regional customers who have interests in that country.

Acknowledgements

2002 has been an eventful and rewarding year for UOB.

For this, credit must go to the wise counsel provided by our

distinguished Board of Directors and the dedication and

hard work put in by management and staff members. I take

this opportunity to thank them for their contributions.

During the year, Mr John C Dean Jr decided to step down

from the Board. The Board thanks him for his past service

and wishes him success in his new endeavours.

UOB's Senior Deputy Chairman and Board Director,

Mr Lee Hee Seng, has decided not to seek re-election at

the forthcoming Annual General Meeting and to retire from

the Bank. Mr Lee contributed greatly to the smooth

integration of UOB and OUB and it is with deep regret that

the Board accepts his decision. On behalf of the Board,

I thank Mr Lee for his invaluable advice and contributions.

The Board and I wish him many happy years of retirement.

Wee Cho Yaw

Chairman & Chief Executive Officer

March 2003

Financial Highlights

Group Assets

2002: $107,469 million – 5.6%

2001: $113,888 million

120000

110000

100000

90000

80000

70000

60000

50000

40000

30000

20000

2001

$ 50,789 56,774 66,324 113,888 107,469

US$ 30,587 34,068 38,293 61,528 61,910

1998 1999 2000

$ m

illio

n

2002

Group Customer Deposits

2002: $67,919 million – 8.8%

2001: $74,452 million

80000

70000

60000

50000

40000

30000

20000

10000

$ 36,492 40,728 43,406 74,452 67,919

US$ 21,976 24,439 25,061 40,223 39,126

$ m

illio

n

Group Customer Loans

2002: $58,884 million – 3.3%

2001: $60,892 million

$ 27,653 27,259 30,045 60,892 58,884

US$ 16,653 16,357 17,347 32,897 33,921

$ m

illio

n

80000

70000

60000

50000

40000

30000

20000

10000

Group Loans/Customer Deposits Ratio

2002: 86.7% + 4.9% points

2001: 81.8%

75.8% 66.9% 69.2% 81.8% 86.7%

110

100

90

80

70

60

50

%

20011998 1999 2000 2002

20011998 1999 2000 200220011998 1999 2000 2002

Note: Where applicable, figures/ratios in this section have been adjusted for impact of adopting Singapore Statement of Accounting Standard (SAS) 10: Events After Balance Sheet Date with effect from 2000, and for impact of adopting revised SAS 12: Income Taxes and Interpretation of SAS (INT) 5: Consolidation – Special Purpose Entities with effect from 2001.


8


Group Capital Adequacy Ratios (BIS)

Total Capital2002: 15.3% – 3.2% points2001: 18.5%

Group Shareholders' Funds

2002: $12,653 million – 0.5%

2001: $12,717 million

$ 5,878 6,191 6,968 12,717 12,653

US$ 3,540 3,715 4,023 6,870 7,289

13000

12000

11000

10000

9000

8000

7000

6000

5000

4000

$ m

illio

n

Group Net Profit After Tax

2002: $1,064.2 million + 15.1%

2001: $924.6 million

1100

1000

900

800

700

600

500

400

300

200

100

$ 332 760 913 925 1,064

US$ 200 456 527 500 613

$ m

illio

n

30

27

24

21

18

15

12

9

6

3

%

20011998 1999 2000 2002 20011998 1999 2000 2002

20011998 1999 2000 2002

Total Capital 21.4% 21.7% 19.8% 18.5% 15.3%

Tier 1 Capital 18.6% 18.6% 17.1% 11.8% 12.2%

Tier 1 CapitalTotal Capital

Group Adjusted Earnings Per Share

2002: 67.7 cents – 12.4%

2001: 77.3 cents

100

90

80

70

60

50

40

30

20

¢ 31.7 72.4 86.8 77.3 67.7

US¢ 19.1 43.4 50.1 41.8 39.0

cent

s

20011998 1999 2000 2002

Tier 1 Capital2002: 12.2% + 0.4% point2001: 11.8%

+ Dividend cover is 1.8 times if the special tax exempt bonus dividend is included.+ + Dividend cover is 1.5 times if the interim dividend in specie of 18.8% is included.

# Includes special tax exempt bonus dividend of 25%.## Includes interim dividend in specie of 18.8%.

45%#

$ 133 416 316 426 720

US$ 80 250 183 230 415

times 2.5 5.0 + 2.9 2.2 2.2 + +

800

700

600

500

400

300

200

100

Dividend Rate

40% tim

es

$ m

illio

n

9

8

7

6

5

4

3

2

1

Dividend Payment

18%

Dividends

Dividend Payment2002: $720.4 million + 69.3%2001: $425.6 million

Dividend Cover

40%

20011998 1999 2000 2002

##

Dividend Cover2002: 2.2 times2001: 2.2 times

58.8%


Group Return On AverageShareholders' Funds

2002: 8.3% – 2.5% points

2001: 10.8%

UOB Group 5.7% 12.6% 13.5% 10.8% 8.3%

Major Local 4.4% 10.6% 12.1% 9.6% 7.7%Bank Groups

18

16

14

12

10

8

6

4

2

Average Rate of MajorLocal Bank Groups

UOB Group

%

20011998 1999 2000 2002

Group Return On AverageTotal Assets

2002: 0.98% – 0.18% point

2001: 1.16%

2.0

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

UOB Group 0.7% 1.4% 1.5% 1.2% 1.0%

Major Local 0.5% 1.2% 1.4% 1.0% 0.8%Bank Groups

Average Rate of MajorLocal Bank Groups

UOB Group

%

20011998 1999 2000 2002

10


Group Total Income

Net Interest Income2002: $2,169 million + 51.8%2001: $1,429 million

$ 1,201 1,133 1,198 1,429 2,169

US$ 723 680 692 772 1,249

$ 514 655 704 795 910

US$ 310 393 406 429 524

$ m

illio

n

Net Interest Income Non-Interest Income

1,7151,903

2,224

Group Total Non-Performing Loans (NPLs)

NPLs2002: $5,679 million – 4.8%2001: $5,968 million

$ 2,072 2,834 2,462 5,968 5,679

US$ 1,248 1,701 1,421 3,224 3,272

% 7.1 9.8 7.8 9.3 9.0

7000

6000

5000

4000

3000

2000

1000

NPLs

%

$ m

illio

n

14

12

10

8

6

4

2

NPLs (Excluding Debt Securities)As A % Of Gross Non-Bank Loans

4000

3500

3000

2500

2000

1500

1000

500

Specific Provision

%

$ m

illio

n

80

70

60

50

40

30

20

10

General Provision Cumulative ProvisionsAs A % Of Total NPLs

1,5181,774

1,664

$ 735 955 896 1,899 2,079

US$ 443 573 517 1,026 1,198

$ 783 819 768 1,435 1,425

US$ 472 491 443 775 821

% 73.3 62.6 67.6 55.9 61.7

3,334

Group Total Cumulative Provisions

Cumulative Specific Provision2002: $2,079 million + 9.5%2001: $1,899 million

3,504

20011998 1999 2000 2002 20011998 1999 2000 2002

20011998 1999 2000 2002

3,079

Non-Interest Income2002: $910 million + 14.5%2001: $795 million

NPLs As A % Of Gross Non-Bank Loans2002: 9.0% – 0.3% point2001: 9.3%

Cumulative General Provision

2002: $1,425 million – 0.7%2001: $1,435 million

Total Cumulative Provisions As A %Of Total NPLs2002: 61.7% + 5.8% points2001: 55.9%

4000

3500

3000

2500

2000

1500

1000

500

1,788


Corporate Information

Honorary Life CounsellorDr Lien Ying Chow

Board Of DirectorsMr Wee Cho Yaw (Chairman & Chief Executive Officer)Mr Lee Hee Seng (Senior Deputy Chairman)Mr Wee Ee Cheong (Deputy Chairman & President)Mr Koh Beng Seng (Deputy President)Mr Ngiam Tong DowMr Ernest Wong Yuen WengMr Wong Meng MengMr Sim Wong HooMr Philip Yeo Liat KokDr Cham Tao SoonMr Tan Kok QuanProf Lim PinMrs Margaret Lien Wen HsienMr Ng Boon Yew

Executive CommitteeMr Wee Cho Yaw (Chairman)Mr Lee Hee Seng (Deputy Chairman)Mr Wee Ee CheongMr Koh Beng SengMr Ngiam Tong Dow

Audit CommitteeMr Ernest Wong Yuen Weng (Chairman)Mr Philip Yeo Liat KokDr Cham Tao SoonMr Tan Kok Quan

Nominating CommitteeMr Wong Meng Meng (Chairman)Mr Wee Cho YawMr Lee Hee SengMr Sim Wong HooDr Cham Tao Soon

Remuneration CommitteeMr Wee Cho Yaw (Chairman)Mr Lee Hee SengDr Cham Tao SoonMr Philip Yeo Liat KokProf Lim Pin

SecretaryMrs Vivien Chan

Share RegistrarLim Associates (Pte) Ltd10 Collyer Quay#19-08 Ocean BuildingSingapore 049315Telephone: (65) 6536 5355Facsimile: (65) 6536 1360

AuditorsPricewaterhouseCoopers8 Cross Street#17-00 PWC BuildingSingapore 048424Partner-in-charge: Mr Chua Kim Chiu(Appointed on 2 August 2002)

Registered Office80 Raffles PlaceUOB PlazaSingapore 048624Telephone: (65) 6533 9898Facsimile: (65) 6534 2334Telex: RS 21539 TYEHUASWIFT: UOVBSGSGWebsite: www.uobgroup.com

Investor Relations80 Raffles Place#16-22 UOB Plaza 2Singapore 048624Telephone: (65) 6539 4439/6539 4416Facsimile: (65) 6538 0270Email: [email protected]

12

Left to right: Wee Cho Yaw, Lee Hee Seng, Wee Ee Cheong

Mr Wee Cho Yaw Chairman & Chief Executive OfficerAge 74. A career banker with more than 40 years ofexperience. Received Chinese high school education.Chairman & CEO of UOB since 1974.

Appointed to the Board on 14 May 1958. Last re-appointedas a Director on 9 May 2002. Executive Director since 1958.Chairman of the Executive Committee since 1976. Chairmanof the Bank's Remuneration Committee and member of itsNominating Committee. Chairman of UOB subsidiaries –Far Eastern Bank and United Overseas Insurance. Chairmanof United International Securities, Haw Par Corporation,Haw Par Healthcare, Hotel Plaza, Overseas Union Enterprise,United Industrial Corporation, United Overseas Land andSingapore Land and its subsidiary, Marina Centre Holdings.Director of Singapore Press Holdings.

Member of the Asia-Pacific Advisory Committee, New YorkStock Exchange. Honorary President of Singapore ChineseChamber of Commerce & Industry. Named Businessman OfThe Year in 2002 and 1989 in the Singapore Business Awardsthat recognise outstanding achievements by Singapore'sbusiness community.

Mr Lee Hee Seng Senior Deputy ChairmanAge 76. An accountant and banker by qualification. Broughtwith him 24 years of experience in finance and managementwhen he joined OUB as Director in 1972. Spent 27 yearswith OUB culminating with his appointment as Chairmanfrom May 1995 to October 2001. Appointed Senior DeputyChairman of UOB in November 2001. Has a distinguishedpublic service record, having served as Chairman of Housing

& Development Board, the Public Service Commission, thePresidential Elections Committee and the Lee Kuan YewExchange Fellowship.

Appointed to the Board on 31 October 2001. Lastre-appointed as a Director on 9 May 2002. An ExecutiveDirector and Deputy Chairman of the Bank's ExecutiveCommittee. Member of its Nominating Committee andRemuneration Committee. Deputy Chairman and Directorof Overseas Union Enterprise. Director of Singapore PressHoldings and Marina Centre Holdings.

Fellow of the Chartered Institute of Bankers, AustralianSociety of Certified Practising Accountants, Institute ofCertified Public Accountants of Singapore and Institute ofChartered Secretaries and Administrators, and Companionof the Institute of Management, UK.

Mr Wee Ee Cheong Deputy Chairman & PresidentAge 50. A professional banker who joined the Bank in 1979.Deputy Chairman & President of UOB since 2000.

Appointed to the Board on 3 January 1990. Last re-electedas a Director on 30 May 1998. Executive Director since 1990.Member of the Bank's Executive Committee. Director ofseveral UOB subsidiaries and affiliates, including Far EasternBank, United Overseas Insurance, United InternationalSecurities, Hotel Plaza and United Overseas Land. Directorof Visa International (Asia Pacific Regional Association) andthe Institute of Banking & Finance. Council Member of theAssociation of Banks in Singapore and Singapore ChineseChamber of Commerce & Industry. Has served as DeputyChairman of Housing & Development Board and Directorof Port of Singapore Authority. Former Director of ASEANSupreme Fund.

Board of Directors


Holds a Bachelor of Science (Business Administration) andMaster of Arts (Applied Economics) from The AmericanUniversity, Washington DC.

Mr Koh Beng Seng Deputy PresidentAge 52. Joined UOB as Deputy President in 2000. Spentover 24 years at the Monetary Authority of Singapore wherehe made significant contributions to the development andsupervision of the Singapore financial sector in his capacityas Deputy Managing Director, Banking & Financial InstitutionsGroup.

Appointed to the Board on 26 May 2000. Last re-electedas a Director on 24 May 2001. Executive Director since2000. Member of the Bank's Executive Committee. Directorof UOB subsidiary, Far Eastern Bank. Director of CharteredSemiconductor Manufacturing and ST Assembly Test Services.Served as Advisor (part-time) to the International MonetaryFund (1998 – 2001).

Holds a Bachelor of Commerce (Honours) from NanyangUniversity and Master of Business Administration fromColumbia University, USA.

Mr Ngiam Tong DowAge 65. Chairman of Housing & Development Board. Hasa distinguished public service career, having served asPermanent Secretary of the Prime Minister's Office, Ministriesof Finance, Trade & Industry, National Development, andCommunications.

Appointed to the Board on 1 October 2001. Last re-electedas a Director on 9 May 2002. An independent andnon-executive Director. Member of the Bank's ExecutiveCommittee. Director of Singapore Press Holdings and

Left to right: Koh Beng Seng, Ngiam Tong Dow, Ernest Wong Yuen Weng

Yeo Hiap Seng. Has served as Chairman of CentralProvident Fund Board, Development Bank of Singapore,Economic Development Board and TelecommunicationAuthority of Singapore, as Deputy Chairman of the Boardof Commissioners of Currency, Singapore and as Directorof Temasek Holdings.

Holds a Bachelor of Arts (Economics, Honours) from theUniversity of Malaya, Singapore and Master of PublicAdministration from Harvard University, USA.

Mr Ernest Wong Yuen WengAge 58. Group CEO and Director of MediaCorp (MediaCorporation of Singapore). Built his career first with theEconomic Development Board in 1967 and then with theMinistry of Finance before joining UOB in 1972. Presidentof UOB from 1990 to 2000 when he left to take up hiscurrent appointment at MediaCorp.

Appointed to the Board on 3 January 1990. Last re-electedas a Director on 24 May 2001. An independent and non-executive Director. Chairman of the Bank's Audit Committee.Director of Hotel Plaza, United Overseas Land and RafflesHoldings. Council Member of Nanyang TechnologicalUniversity (NTU) and Chairman of the NTU Endowment FundInvestment Committee. Has served as Chairman of theAssociation of Banks in Singapore, Board Member ofEconomic Development Board and Director of ASEANSupreme Fund. Former Director of several UOB subsidiariesand affiliates, including Far Eastern Bank, United OverseasInsurance and United International Securities.

Holds a Bachelor of Science (Chemical Engineering, Honours)from the University of Surrey, UK.

Board of Directors

14

Left to right: Wong Meng Meng, Sim Wong Hoo, Philip Yeo Liat Kok, Dr Cham Tao Soon

Mr Wong Meng MengAge 54. Senior Partner of Wong Partnership. Notary Publicand Senior Counsel, Supreme Court of Singapore.

Appointed to the Board on 14 March 2000. Last re-electedas a Director on 9 May 2002. An independent andnon-executive Director. Chairman of the Bank's NominatingCommittee. Director of UOB subsidiary, Far Eastern Bank.Honorary Legal Advisor to the Real Estate Developers'Association of Singapore.

Holds a Bachelor of Law (Honours) from the University ofSingapore. Accredited Arbitrator to the SingaporeInternational Arbitration Centre.

Mr Sim Wong HooAge 47. Founder, Chairman, Chief Executive Officer andDirector of Singapore-based Creative Technology (Nasdaq:CREAF). Holds a Diploma in Electronics and ElectricalEngineering from Ngee Ann Polytechnic. A prominenttechnopreneur and pioneer best known for bringing sound,video and digital entertainment technology into thepersonal computer.

Appointed to the Board on 14 March 2000. Last re-electedas a Director on 9 May 2002. An independent andnon-executive Director. Member of the Bank's NominatingCommittee. Director of UOB subsidiary, Far Eastern Bank.Director of Frontline Technologies Corporation andMediaRing.com.

Mr Philip Yeo Liat KokAge 56. Chairman of the Agency for Science, Technology& Research (A*STAR). Recognised for his contributions toSingapore's economic development and his pioneering rolein the promotion and development of the country'sinformation technology, semiconductor and chemicalindustries. Brings to the Bank wide government and privatesector experience over a 30-year career.

Appointed to the Board on 26 May 2000. Last re-electedas a Director on 24 May 2001. An independent and non-executive Director. Member of the Bank's Audit Committeeand Remuneration Committee. Director of UOB subsidiary,Far Eastern Bank. Co-Chairman of Economic DevelopmentBoard. Chairman of CapitaLand and Board Member ofNasdaq-listed Infosys of India. Has served as Chairman ofSembCorp Industries.

Holds a Bachelor of Applied Science (Industrial Engineering)and Doctorate of Engineering from the University of Toronto,Master of Science (Systems Engineering) from the Universityof Singapore and Master of Business Administration fromHarvard University, USA.

Dr Cham Tao SoonAge 63. A Distinguished Professor of Nanyang TechnologicalUniversity (NTU). Held the post of President of NTU from1981 to 2002.

Appointed to the Board on 4 January 2001. Last re-electedas a Director on 24 May 2001. An independent and non-executive Director. Member of the Bank's Audit Committee,Nominating Committee and Remuneration Committee.Director of UOB subsidiary, Far Eastern Bank. Chairman ofNatSteel and Singapore Symphonia Company. Director ofAdroit Innovations, Keppel Corporation, Robinson &Company, Singapore International Foundation, TPA StrategicHoldings and WBL Corporation. Board Member of LandTransport Authority.

Has served as Board Member of the Agency for Science,Technology & Research (A*STAR) and as Member of theNTU Council and National University of Singapore Council.Former Director of Ei-Nets, Singapore MRT and WearneTechnology.

Holds a Bachelor of Engineering (Civil, Honours) from theUniversity of Malaya, Bachelor of Science (Mathematics,


Left to right: Tan Kok Quan, Prof Lim Pin, Mrs Margaret Lien Wen Hsien, Ng Boon Yew

Honours) from the University of London and Doctor ofPhilosophy (Fluid Mechanics) from the University ofCambridge, UK. Fellow of the Institution of Engineers,Singapore and Institution of Mechanical Engineers, UK.

Mr Tan Kok QuanAge 64. Senior Partner of Tan Kok Quan Partnership. NotaryPublic and Senior Counsel, Supreme Court of Singapore.

Appointed to the Board on 1 October 2001. Last re-electedas a Director on 9 May 2002. An independent and non-executive Director. Member of the Bank's Audit Committee.Director of Network Foods International. Has served asDeputy Chairman of Public Utilities Board. Former Directorof NH Ceramics.

Holds a Bachelor of Law (Honours) from the University ofSingapore.

Prof Lim PinAge 67. University Professor & Professor of Medicine at theNational University of Singapore (NUS). Senior Consultantat the National University Hospital.

Appointed to the Board on 1 October 2001. Last re-electedas a Director on 9 May 2002. An independent and non-executive Director. Member of the Bank's RemunerationCommittee. Director of Raffles Medical Group. CorporateAdvisor to Singapore Technologies. Chairman of the NationalWages Council and Bio-ethics Advisory Committee. Hasserved as Vice-Chancellor of NUS and Deputy Chairman ofEconomic Development Board. Former Board Member ofthe Institute of Policy Studies, Singapore InternationalFoundation and Singapore Institute of Labour Studies.

Holds a Master of Arts and Doctor of Medicine fromthe University of Cambridge, UK. Fellow of the Academyof Medicine of Singapore (FAMS), FRCP (London) andFRACP.

Mrs Margaret Lien Wen HsienAge 60. Appointed to the Board on 1 October 2001. Lastre-elected as a Director on 9 May 2002. A non-independentand non-executive Director. Director of Overseas UnionEnterprise, Lien Ying Chow Private Limited and Wah Hin &Company Limited. Governor of the Lien Foundation.

Holds a Bachelor of Law (Honours) from the London Schoolof Economics and Political Science, University of London.

Mr Ng Boon YewAge 48. A Certified Public Accountant and Member of theInstitute of Certified Public Accountants of Singapore, withmore than 20 years of accounting and auditing experiencein both the private and public sectors.

Appointed to the Board on 1 October 2001. Last re-electedas a Director on 9 May 2002. An independent and non-executive Director. Director of Datapulse Technology, FischerTech and Royal Clicks. Group Chief Financial Officer ofSingapore Technologies. Member of the Public AccountantsBoard.

Former Partner in charge of corporate finance services andformer Head of Singapore banking practice at majorinternational accounting firm, KPMG. Has served as Chairmanof the Disclosure and Accounting Standards Committee andMember of the Council on Corporate Disclosure andGovernance.

Fellow of the Association of Chartered Certified Accountants.Associate Member of the Institute of Chartered Accountantsin England and Wales, Chartered Institute of ManagementAccountants, Institute of Chartered Secretaries andAdministrators and Chartered Institute of Taxation.

Principal Officers

Mr Terence Ong Sea EngSenior Executive Vice President,Global Treasury and Asset ManagementMr Ong joined UOB in 1982. He holds a Bachelor ofAccountancy from the University of Singapore and has20 years of experience in treasury services and operations.Mr Ong was the Deputy General Manager of the Board ofCommissioners of Currency, Singapore before joining UOB.

Mr Samuel Poon Hon ThangSenior Executive Vice President, Institutional BankingMr Poon joined UOB in 1988. He holds a Bachelor ofCommerce (Honours) from Nanyang University and has over25 years of experience in banking and finance. Prior tojoining UOB, Mr Poon worked in Citibank N.A. for nineyears.

Mr Joseph Chen Seow ChanManaging Director, Trading & Institutional Treasury Services,Global TreasuryMr Chen joined UOB in 1989. He holds a Bachelor of Science(Honours) from the University of Singapore. Mr Chen hasmore than 25 years of experience in the treasury and fixedincome business. Before joining UOB, he worked in a numberof major foreign banks and the Monetary Authority ofSingapore.

Mr Bill Chua Teck HuatExecutive Vice President, OperationsMr Chua joined UOB in 2002. He holds a Bachelor of Arts(Economics) and Bachelor of Engineering (Industrial, Honours)

from the University of Newcastle, Australia. Mr Chua hasmore than 22 years of experience in wholesale and consumerbanking. Prior to joining UOB, he worked in OUB, CitibankN.A. and the Ministry of Foreign Affairs.

Ms Susan HweeExecutive Vice President, Information TechnologyMs Hwee joined UOB in 2001. She holds a Bachelor ofScience from the National University of Singapore. Ms Hwee,with over 20 years of experience in information technology,has held appointments in Keppel TatLee Bank, Citibank N.A.and IBM.

Mr Kuek Tong AuExecutive Vice President, Corporate ServicesMr Kuek joined UOB in 1970. His key responsibilities includethe management of the Bank's corporate affairs, finance,investor relations, legal and secretariat, property and taxfunctions. Mr Kuek holds a Bachelor of Accountancy(Honours) from the University of Singapore and has morethan 30 years of experience in finance.

Mr Michael Lau Hwai KeongExecutive Vice President,International and Strategic Planning & ResearchMr Lau joined UOB in 2000. He holds a Bachelor of BusinessAdministration (Honours) from the National University ofSingapore. He is also a Chartered Financial Analyst. Mr Lauhas 18 years of experience in the financial services industry,and previously held senior appointments in the CentralDepository and Monetary Authority of Singapore.

16

Left to right: Terence Ong Sea Eng, Samuel Poon Hon Thang, Joseph Chen Seow Chan, Bill Chua Teck Huat, Susan Hwee, Kuek Tong Au

Mr Francis Lee Chin YongManaging Director & Chief Executive,United Overseas Bank (Malaysia) BhdMr Lee joined UOB in 1980. He was appointed to his currentposition following the merger of OUB's operations in Malaysiainto United Overseas Bank (Malaysia) Bhd on 2 February2002. Prior to that, he has headed United Overseas Bank(Malaysia) Bhd as its Chief Executive Officer since September1998. Mr Lee has spent 22 years in UOB, holding seniorpositions in operations and consumer services.

Mr David Loh Hong KitExecutive Vice President, Risk Management & ComplianceMr Loh joined UOB in 2000. He holds a Bachelor of Science(Honours) from the University of Birmingham, UK and Masterof Business Administration from the University of New SouthWales. He is also a Chartered Financial Analyst. Mr Loh has20 years of experience in the financial services industry. Hewas Senior Vice President in the now Singapore ExchangeDerivatives Trading/Derivatives Clearing from 1992 to 1999.

Ms Sim Puay SuangExecutive Vice President, Personal Financial ServicesMs Sim joined UOB in 1978. She holds a Bachelor of Artsfrom the University of Singapore. A 24-year career bankerin UOB, Ms Sim has extensive experience and expertise inconsumer banking. She is responsible for the businessdevelopment and management of the Bank's individualbanking business. Her portfolio includes personal deposits,loans, investments, credit and debit cards, travel-relatedservices and privilege banking.

Mr Wee Joo YeowExecutive Vice President, Corporate BankingMr Wee joined UOB in 2002. He holds a Bachelor of BusinessAdministration (Honours) from the University of Singaporeand Master of Business Administration from New YorkUniversity. A career banker with 30 years of corporatebanking experience, Mr Wee has held senior appointmentsin OUB and First National Bank of Chicago prior to joiningUOB.

Mr Wong Chong FattExecutive Vice President, High Networth Customers &Managing Director, Banknotes, Futures &Personal Treasury Services, Global TreasuryMr Wong joined UOB in 2000. He holds a Bachelor ofCommerce from Nanyang University. Mr Wong brings tothe Bank more than 20 years of experience in treasuryproducts, having held senior appointments in ABN AMROFutures, NatWest Futures and HSBC Futures.

Mr Yeo Eng CheongExecutive Vice President, Commercial CreditMr Yeo joined UOB in 1986. He holds a Bachelor of BusinessAdministration (Honours) from the University of Singapore.Mr Yeo is a career banker with more than 30 years ofexperience in credit and marketing, including 10 years withChase Manhattan Bank (now known as JP Morgan Chase& Co).


Left to right: Michael Lau Hwai Keong, Francis Lee Chin Yong, David Loh Hong Kit, Sim Puay Suang, Wee Joo Yeow, Wong Chong Fatt, Yeo Eng Cheong

18

Corporate Governance

The UOB Group is committed to high standards of corporate governance. The Board believes that

good governance is essential to achieving the Bank's objectives of maximising shareholder value

and safeguarding the interests of its stakeholders.

Under the Singapore Exchange's listing rules, UOB ("the Bank") is required to describe its corporate

governance practices with specific reference to the Code of Corporate Governance issued by the

Committee on Corporate Governance in 2001 ("Code"). The following report describes the corporate

governance policies and practices of the Bank during the financial year 2002, which are generally

in line with the Code.

Board of Directors

The Board sets the overall business direction and objectives for the Bank. It oversees the business

and affairs of the Bank, and the processes for evaluating the adequacy of the Bank's risk management,

internal controls and financial reporting. The Board reviews the Bank's major investments, asset

quality, business plans and operating results achieved. The Board's approval is required for the annual

budget, any major acquisition or disposal, corporate or financial restructuring, issue of shares and

other capital, payment of dividends and other distributions to shareholders.

The Board comprises 14 directors, four of whom are executive directors. Of the non-executive

directors, nine are considered independent and they are Messrs Ngiam Tong Dow, Ernest Wong

Yuen Weng, Wong Meng Meng, Sim Wong Hoo, Philip Yeo Liat Kok, Tan Kok Quan, Ng Boon Yew,

Dr Cham Tao Soon and Prof Lim Pin. The current Board comprises members with diverse corporate

experiences who, as a group, provide core competencies relevant to the business of the Bank. The

Board considers the current board size as adequate for its present operations. As independent and

non-executive directors make up almost two-thirds of the Board, no individual or group is able to

dominate the Board's decision-making process. Detailed information on the directors' experience

and qualifications can be found on pages 12 to 15.

One-third of the directors retire at every annual general meeting and may be re-elected by the

shareholders. However, directors holding the positions of Chairman, Senior Deputy Chairman and

Deputy Chairman are not subject to retirement by rotation. Directors over 70 years of age are

required under the Companies Act to be re-appointed annually. Executive directors, being staff of

the Bank, are employed on terms which allow termination by notice.


The Bank has a budget for directors' training needs. Guidance is given to new directors on the

requirements of disclosure of interests, restrictions on dealings in securities and the duties and

responsibilities of directors under Singapore law. Directors are updated on changes in relevant

accounting standards. The company secretary, to whom the directors have independent access,

assists the Board and keeps it apprised of relevant laws and regulations. The directors may also

request independent professional advice, at the Bank's expense.

The Chairman of the Board is Mr Wee Cho Yaw, who is also the Chief Executive Officer ("CEO")

of the Bank. As Chairman, Mr Wee leads Board discussions and deliberations. Together with his

Board colleagues, he develops appropriate strategies for the Bank. As CEO, he is responsible for

the day-to-day management of the Bank’s affairs. Mr Wee has been both Chairman and CEO since

1974, and is closely identified with the UOB Group’s success. It is well recognised that he performs

an important representational role for the UOB Group, locally and internationally. Mr Wee’s track

record shows that he has been able to consistently and capably execute the responsibilities of both

the Chairman and CEO positions effectively, guiding the UOB Group to steady and sustained growth

over the years.

The Chairman of the Board ensures that board meetings are held when necessary. He sets the

meeting agenda and ensures that directors are provided with complete, adequate and timely

information. The directors are kept updated and informed of the Bank's business through management

reports. Directors are provided with detailed papers on the Bank's operations and business. Senior

management staff would regularly brief the Board on the Bank's businesses and operations. There

are four scheduled board meetings a year. Additional meetings may be called as and when required.

Last year, the Board met seven times and the directors’ attendance record is set out on page 24.

In furtherance of its duties, the Board has delegated specific responsibilities to four board committees.

Board Committees

Executive Committee ("Exco")

The Exco formulates the Bank's business strategies and conducts on-going monitoring and review

of the Group's performance, risk management, investments and the quality of the loan portfolio.

Certain discretionary limits and authority have been delegated by the Board to the Exco and the

CEO for credit and loan approvals, treasury and investment activities, capital expenditure, budgeting

and human resource management.

The members of the Exco are Messrs Wee Cho Yaw (chairman), Lee Hee Seng, Wee Ee Cheong,

Koh Beng Seng and Ngiam Tong Dow. The Exco meets monthly.

Nominating Committee ("NC")

The NC identifies candidates and reviews all nominations of directors for appointment to the Board,

Executive Committee, Audit Committee and Remuneration Committee. The NC also reviews

nominations to key executive positions, such as the CEO, President, Deputy President and Chief

Financial Officer positions. Under the Code, the NC is charged with the duty of assessing the

performance of the Board and the directors and determining the independence of directors.

20


The NC has made its recommendations to the Board in respect of the re-election and re-appointment

of directors at the forthcoming annual general meeting. In assessing the performance of the Board,

the NC referred to a set of criteria, based on the quantitative criteria recommended in the Code,

as well as other qualitative criteria. The directors were assessed by the Chairman of the Board and

the chairman of the NC based on various criteria including attendance, participation at meetings

and contributions outside of a board setting. NC members abstain from deliberations in respect of

their own nominations/assessment.

The NC is of the view that all directors can be considered independent, except for Messrs Wee Cho

Yaw, Lee Hee Seng, Wee Ee Cheong and Koh Beng Seng who are executives of the Bank and

Mrs Margaret Lien Wen Hsien who is related to a substantial shareholder of the Bank. Although

Mr Wong Meng Meng, whose firm provides legal services to the UOB Group, and Mr Ernest Wong

Yuen Weng, who retired from the Bank as President in 2000, would not be considered independent

under the Code, the NC is of the opinion that they may still be considered independent because

they are able to maintain their objectivity and independence at all times in the discharge of their

duties as directors.

The members of the NC are Messrs Wong Meng Meng (chairman), Wee Cho Yaw, Lee Hee Seng,

Sim Wong Hoo and Dr Cham Tao Soon. The NC meets at least once a year.

Remuneration Committee ("RC")

The RC reviews and recommends to the Board the remuneration of the executive directors, the

grant of share options to employees and the payment of directors' fees.

The remuneration policy of the Bank seeks, inter alia, to align the interests of employees with those

of the Bank, to reward and encourage performance based on core values established by the Bank

and ensure that remuneration is commercially competitive to attract and retain talent. The remuneration

package, which is applicable to all Bank staff, comprises fixed and variable components. The base

salary makes up the fixed component while the variable component can be in the form of a

performance bonus and, where applicable, share options. The Board had considered that there was

no circumstance that required the remuneration policy to be submitted to the annual general

meeting for approval.

Directors' fees are proposed as a lump sum to be approved by shareholders and to be divided

amongst all the directors as they deem fit. Generally, directors who undertake additional duties as

chairman and/or members of board committees will receive higher fees because of their additional

responsibilities. Details of the total fees and other remuneration of the directors are set out in the

Directors' Report on page 84. The remuneration of the Bank's top five executives takes into account

the pay and employment conditions within the industry and is performance-related. The Bank

believes that it is not in the best interest of the Bank to disclose the details of the remuneration of

its top five key executives due to the sensitive nature of this information. There is no immediate

family member (as defined in the Singapore Exchange’s Listing Manual) of a director in the employ

of the Bank whose annual remuneration exceeds $150,000.

The RC members are Messrs Wee Cho Yaw (chairman), Lee Hee Seng, Philip Yeo Liat Kok, Dr Cham

Tao Soon and Prof Lim Pin. The Code recommends that the chairman of the RC should be an


independent and non-executive director. However, the Board in consultation with the NC, felt that

Mr Wee Cho Yaw, with his many years of relevant experience would be the best person to chair

the RC. The RC meets at least once a year and RC members abstain from deliberations in respect

of their own remuneration.

Audit Committee ("AC")

The AC carries out the functions set out in the Code and Companies Act. The AC comprises

independent and non-executive directors, namely, Messrs Ernest Wong Yuen Weng (chairman),

Philip Yeo Liat Kok, Tan Kok Quan and Dr Cham Tao Soon. The AC's terms of reference include

reviewing the financial statements, the internal and external audit plans and audit reports, the

external auditors’ evaluation of the system of internal accounting controls, the scope and results

of the internal and external audit procedures, the adequacy of internal audit resources, the cost

effectiveness, independence and objectivity of external auditors, the significant findings of internal

audit investigations and the interested person transactions. The reviews are made with the internal

and external auditors, the financial controller and/or other senior management staff, as appropriate.

Annually, the AC also nominates the external auditors for re-appointment.

The AC has reviewed with the internal and external auditors their evaluation of the Bank's systems

of internal controls and risk management processes, and made its report to the Board. The AC noted

that in establishing a system of internal controls, due consideration would be given to the materiality

of relevant risks, the probability of loss and the costs that would be incurred in implementing the

control measures. The Board has derived reasonable assurance from reports submitted to it that the

internal control systems and risk management processes, which are designed to enable the Bank

to meet its business objectives while managing the risks involved, are satisfactory for the Bank’s

business as presently conducted.

The AC reviewed and discussed with management and the external auditors, the UOB Group's

audited financial statements for the financial year 2002, the quality of the accounting principles

that were applied and their judgement of items that might affect the financials. Based on the review

and discussions, the AC is of the view that the financial statements are fairly presented in conformity

with generally accepted accounting principles in all material aspects.

The AC also reviewed the financial, business and professional relationships between the external

auditors and the Bank, and received the requisite affirmations of independence from the external

auditors. The AC is of the view that the volume and nature of the non-audit services provided by

the external auditors are not such as would affect the independence and objectivity of the external

auditors.

The AC meets separately with the internal auditor and the external auditors, in the absence of

management, at least once a year.

The AC has the power to conduct or authorise investigations into any matter within its terms of

reference and has adequate resources for the proper discharge of its duties. The AC met four times

last year.

22


Internal Audit

The UOB Group has a well-established internal audit function ("Group Audit"). Group Audit assists

the Board in monitoring and managing business risks and the internal controls of the Group. Group

Audit operates within the framework of its Audit Charter. It has adopted the Standards for the

Professional Practice of Internal Auditing set by the Institute of Internal Auditors. In addition, Group

Audit was awarded the ISO 9001 (2000) Certification by the UK and USA Accreditation Services

in August 2001 and has passed all semi-annual inspections for re-certification to-date.

The scope of Group Audit covers the audit of all the Bank's units and operations, including its

overseas branches and subsidiaries. Group Audit's responsibilities include the audits of operations,

lending practices, financial control, management directives, regulatory compliance, information

technologies and the risk management processes of the Bank. Group Audit adopts a structured

risk-based approach in planning its audit activities annually. Under this approach, all auditable areas

identified in the Group are assessed, scored and ranked against the risk factors that Group Audit

has compiled. Based on the risk rating of the various auditable areas, Group Audit would prioritise

its audits and allocate appropriate levels of resources accordingly. The structured audit risk assessment

approach ensures that all risk-rated auditable areas are kept in view to ensure proper coverage and

audit frequency. The risk-based audit plan is reviewed annually taking into account the changing

risk environment.

Group Audit participates actively in major systems development activities and project committees

in the role of an auditor. In addition, Group Audit audits the various application systems in production,

data centres, network security and the Information Technology Sector, paying special attention to

key Internet banking and e-commerce application systems. Group Audit uses the Control Objectives

for Information and Related Technology (COBIT) for evaluating the internal control systems of the

Bank.

The banking subsidiaries, United Overseas Bank (Malaysia), UOB Radanasin Bank in Thailand and

United Overseas Bank Philippines, each has its own internal audit function and is also subject to

its local regulations. The Head of Internal Audit in each of the banking subsidiaries reports to its

respective local audit committee and to Group Audit and administratively, to the local CEO. They

are required to provide a monthly report on audit activities and significant issues to the Head of

Group Audit. Group Audit conducts audits of selected business areas and reviews the internal audit

Mr Larry Lam

Senior Vice President & Head, Group Audit

Mr Larry Lam joined the Bank in 1998. He holds Bachelor of Information Systems and Master

of Business Administration degrees from California State Polytechnic University. Mr Lam is a

Certified Public Accountant (USA) as well as a Certified Information Systems Auditor. He brings

to the Bank 17 years of internal and external auditing and information technology experience

from the United States. Mr Lam is currently serving as a Governor of the Institute of Internal

Auditors, Singapore. He is also a voting member of the International Banking Security Association.


work of each of the banking subsidiaries. Group Audit is spearheading the standardisation of the

banking subsidiaries’ audit charter, practices, planning and reporting processes.

There are formal procedures for Group Audit to report its audit findings to management and to the

AC. Group Audit works closely with the external auditors to co-ordinate their audit work plans. The

Head of Group Audit reports directly to the AC and administratively, to the Chairman and CEO.

Risk Management

As the management of risk is fundamental to the financial soundness and integrity of the Group,

risk evaluation forms an integral part of the Group's business strategy development. The risk

management philosophy is that all risks taken must be identified, measured, monitored and managed

within a robust risk management framework, and that returns must be commensurate with the

risks taken.

The Board has overall responsibility for determining the type and level of business risks that the

Group undertakes to achieve its corporate objectives. The Board has delegated to various committees

the authority to formulate, review and approve policies and limits on monitoring and managing risk

exposures. The major policy decisions and proposals on risk exposures approved by these committees

are subject to review by the Exco.

The various committees comprise top management and senior executives of the Bank who meet

regularly to deliberate on matters relating to the key types of risks under their respective supervision.

The key risks are credit and country risk, balance sheet risk, liquidity risk, market risk and operational

risk.

The Credit Committee deals with all credit as well as country/transfer risk matters, including

approval of credit applications, formulation of credit policies and the review of existing credit facilities.

The Asset Liability Committee formulates, reviews and approves policies, limits and strategies

regarding the balance sheet structure, liquidity needs and trading activities.

The Investment Committee formulates, reviews and approves policies, limits and strategies regarding

the investment and management of funds.

The Computer Committee determines and oversees the prioritisation of the Group's investments

in IT as well as the resources committed to the development of the Group's technology strategy

and infrastructure, and ensures that these are in line with the Group's business strategy.

The Management Committee formulates, reviews and approves policies and strategies relating

to the monitoring and management of operational risks of the Group across all business and support

units, as well as those relating to anti-money laundering measures. Under the Group Operational

Risk Management framework, business and support units identify significant operational risks relating

to their respective areas of operations and continually assess and monitor these risks through

the Operational Risk Self Assessment (ORSA) process and through Key Operational Risk Indicators

(KORIs).

24


Name of Director Number of Meetings Attended in 2002

Board of Executive Audit Nominating RemunerationDirectors Committee Committee Committee Committee

Mr Wee Cho Yaw 7 11 – 1 1

Mr Lee Hee Seng 7 11 – 1 1

Mr Wee Ee Cheong (Resigned from Audit Committee on 1 November 2002) 7 8 3 – –

Mr Koh Beng Seng 7 11 – – –

Mr Ho Sim Guan (Retired from the Board and Executive Committee on 9 May 2002) 1 3 – – 1

Mr Ngiam Tong Dow 7 10 – – –

Mr Ernest Wong Yuen Weng 5 – 4 – –

Mr Wong Meng Meng 4 – – 1 –

Mr John C Dean Jr (Resigned from the Board and Nominating Committee on 17 June 2002) 1 – – 1 –

Mr Sim Wong Hoo 4 – – 1 –

Mr Philip Yeo Liat Kok 3 – 3 – 1

Dr Cham Tao Soon (Appointed to Nominating Committee on 13 September 2002) 4 – 3 – 1

Mr Tan Kok Quan 5 – 4 – –

Prof Lim Pin 5 – – – 1

Mrs Margaret Lien Wen Hsien 7 – – – –

Mr Ng Boon Yew 5 – – – –

Number of Meetings Held in 2002 7 11 4 1 1

Directors’ Attendance in 2002

The Risk Management & Compliance Sector, which is independent of the business units, performs the role

of implementing risk management policies and procedures. With respect to regulatory and operational

compliance, the Risk Management & Compliance Sector develops policies to address the requirements for

each business unit and, through the compliance officers in the business units, puts in place the proper control

procedures to ensure compliance. In addition, the Business Area Control Unit under Finance Division will

enforce compliance of trading policies and limits by the trading desks at Global Treasury. The process by which

the Group's risk exposures are monitored and managed is detailed under the section 'Risk Management' on

pages 25 to 49.

Communication with Shareholders

The Board keeps shareholders updated on the business and affairs of the Bank through the quarterly release

of the Bank's results, the publication of the Bank's annual report and the timely release of relevant information

through the MASNET of the Singapore Exchange. Shareholders are afforded the opportunity to raise relevant

questions and to communicate their views at shareholders' meetings. The Bank also holds media and analysts'

briefings of its results. The Bank does not practise selective disclosure of information. Shareholders and

investors can visit the Bank's investor relations website at www.uobgroup.com for information on the Bank.

Ethical Standards

The Bank has adopted the Association of Banks in Singapore's Code of Conduct for all staff and drawn up

guidelines for compliance. The Bank has also adopted the Singapore Exchange's Best Practices Guide with

respect to dealings in securities and has a Code on Dealings in Securities for the guidance of directors and

officers.

Credit and Country Risk Management

Credit RiskCounter-party and credit risk is defined as the potential loss arising from any failure by customersto fulfil their obligations, as and when they fall due. All credit exposures, whether on-balance sheetor off-balance sheet, are assessed. These obligations may arise from lending, trade finance,investment, receivables under derivative and foreign exchange contracts and other credit-relatedactivities undertaken by the Group.

The Credit Committee, under delegated authority from the Board of Directors, approves creditpolicies, guidelines and procedures to control and monitor such risks. It has day-to-day responsibilityfor identifying and managing portfolio and risk concentration issues, including country exposureand industry sector exposure. The risk parameters for accepting credit risk are clearly defined andcomplemented by policies and processes to ensure that the Group maintains a well diversified andhigh quality credit portfolio. The decisions of the Credit Committee and its monthly risk managementreports are reviewed by the Executive Committee of the Board.

Credit discretionary limits are delegated to officers of individual business units, depending on theirlevels of experience. Approval of all credits is granted in accordance with credit policies andguidelines. Defined credit risk parameters include single borrower, obligor, security concentrations,identified high-risk areas, maximum tenor and acceptable structures, and collateral types.

Additional policies are in place to govern the approval of 'Related Parties' credit facilities. 'RelatedParties' refer to individuals or companies with whom the authorised credit approving authorityand/or his/her immediate family members have a relationship, whether as director, partner,shareholder or any other relationship which would give rise to a potential conflict of interest.

Risk Management


Credit Risk Management

Portfolio Review• Concentration Analysis• Stress Testing

Procedures on Classification of Accounts• Auto-Classification based on Ageing

of Past Dues• De-Classification• Provisioning of

Non-Performing Loans

Formulation of Credit Policies andRisk Parameters• Acceptable Collateral/Concentrations• Maximum Advance Margin for Collateral• Maximum Individual

Borrower Exposure• Maximum Tenor

of Facility

Credit Policies/Procedures• Communication of Policies

and Procedures throughOnline Distribution

• Upgrading of Skills throughContinuous Training

Discretionary Limits• Delegation of

DiscretionaryLimits tiered by:- Corporate Grade- Portfolio- Track Record

Country of Risk• Setting of Country Limits• Analysis of Country Risks

Credit Risk Mitigation• Credit Review

- Compliance- Credit Quality Assurance

• Special Loans (Recovery/Consultation)

Credit Rating System• Calibration of Borrower Risk• Credit Alert

Credit relationships with 'Related Parties' must be established on a strictly arm's length commercialbasis. An approving authority shall abstain and absent himself/herself from the deliberation andapproval of credit cases where the borrower is a 'Related Party' except that an approving authoritymay participate in the credit deliberation if the 'Related Party' is a:• company in the UOB Group;• publicly listed company or company related to a publicly listed company;• company formed by professional bodies, trade or clan associations, or societies.

The Board of Directors must be informed immediately in the event that any 'Related Party' borroweris in default of payment and/or in breach of any material term of the credit facility and such defaultor breach is not rectified within seven days of notice from the Group.

A comprehensive set of limits (country, regional, industry and counter-party) is in place to addressconcentration issues in the Group's portfolio and a rigorous process is established to regularlyreview and report asset concentrations and portfolio quality so that risks are accurately assessedand properly monitored and approved. These cover large credit exposures by obligor group,collateral type, industry, product and country, level of non-performing loans and adequacy ofprovisioning requirements. In particular, the trends and composition of exposures to property-related loans are closely monitored, analysed and reported on an on-going basis to ensure thatexposures are kept within regulatory requirements and internal guidelines. The exposure concentrationsand non-performing loans by industry type are reported to the Credit Committee and the ExecutiveCommittee of the Board on a monthly basis and to the Board of Directors on a quarterly basis.

Credit audits and reviews are regularly carried out to proactively identify and address potentialweakness in the credit process and to pre-empt any unexpected deterioration in the credit quality.

The Group has a counter-party risk rating system in place to support consistent credit risk analysisfor each counter-party. The risk rating system, together with the Group’s plans to estimate recoveryrates and exposures upon default, will enable it to better quantify potential credit losses in future.

Customer LoansLoans and advances are made to customers in various industry segments and business lines. Thetop 20 obligor group borrowers and top 100 group borrowers made up 18.6% and 30% of totalloans and advances respectively.

Obligor groups are defined in accordance with MAS Notice 623 to comply with Section 29 (1)(a)of the Banking Act. Where the parent company is a borrower, exposures to the parent companyand companies that it has 20% or more shareholding or power to control are aggregated into asingle obligor group.

As at 31 December 2002, 37.2% of the Group's exposure was in its personal financial servicesportfolio, comprising mainly housing loans, other mortgage loans, credit cards and vehicle financing.The balance of the exposure was spread among various industry segments.

Risk Management

26

Management of Performing Loans, Non-Performing Loans and Cumulative ProvisionsThe Group classifies its loan portfolios according to the borrower's ability to repay the loan fromits normal source of income. All loans and advances to customers are classified into the categoriesof 'Pass', 'Special Mention' or 'Non-Performing'. Non-Performing Loans are further classified as'Substandard', 'Doubtful' or 'Loss' in accordance with MAS Notice 612. The Group also practisessplit classification of 'Substandard' into 'Substandard – Doubtful' and 'Substandard – Loss'. Interestincome on all Non-Performing Loans is suspended and ceases to accrue. Such loans will remainclassified until servicing of the account is satisfactory. Where appropriate, classified loans aretransferred to in-house recovery specialists to maximise recovery prospects.

The composition of loans and advances and contingent liabilities to customers were as follows:


Loans & Advances Contingent LiabilitiesBy Industry Type (%) 2002 2001 2002 2001–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Transport, storage and communication 3.3 3.6 2.8 3.5Building and construction 14.7 15.1 17.4 22.8Manufacturing 8.6 8.3 10.3 11.9Non-bank financial institutions 17.3 16.8 45.5 30.6General commerce 10.0 9.8 13.2 13.6Professionals and private individuals 15.0 14.8 2.7 2.7Housing loans 22.2 20.7 – –Others 8.9 10.9 8.1 14.9–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total (%) 100.0 100.0 100.0 100.0–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total gross loans ($ million) 62,339 64,211 8,682 7,673–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Loan Classification Description––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Pass All payments are current and full repayment of interest and principal from normal sources is notin doubt.

Special Mention There is some potential weakness in the borrower's creditworthiness, but the extent of any credit deterioration does not warrant its classification as a Non-Performing Loan.

Non-Performing: There is weakness in the borrower's creditworthiness that jeopardises normal repayment.Substandard Default has occurred or is likely to occur. A credit is greater than 90 days past due, or the

repayment schedule has been restructured.

Non-Performing: A Substandard Loan that is partially secured by tangible collateral and the recovery rate onSubstandard – Doubtful the unsecured portion is expected to be more than 50%.

Non-Performing: A Substandard Loan that is partially secured by tangible collateral and the recovery rate onSubstandard – Loss the unsecured portion is expected to be less than 50%.

Non-Performing: There is severe weakness in the borrower's creditworthiness, full repayment is highlyDoubtful questionable and no collateral is available.

Non-Performing: The chance of recovery from the loan is insignificant and no collateral is available.Loss

The Group's provisions for credit losses are intended to cover probable credit losses through chargesagainst profit. The provisions consist of an element that is specific to the individual loan and alsoa general element that has not been specifically applied. The Group constantly reviews the qualityof its loan portfolio based on its knowledge of the borrowers and, where applicable, of the relevantindustry and country of operation.

A specific provision is made when the Group believes that the creditworthiness of a borrower hasdeteriorated to such an extent that the recovery of the whole outstanding loan is in doubt. Theamount of specific provision to be made is based on the difference between the discounted cashflows or collateral value of an impaired loan and the carrying value of that loan.

A general provision is made to cover possible losses and could be used to cushion any unforeseenlosses in the loan portfolio. In relation to the loan portfolios of its overseas operations, the Group'spolicy is to make provisions based on local (i.e., the country of domicile of the overseas operation)regulatory requirements for local reporting purposes, and then, where necessary, to make additionalprovisions to comply with the Group's provisioning policy and the Monetary Authority of Singapore(MAS) regulations.

Specific provisions are made for each loan grade in the following manner:

Loan InterestThe fact that a loan is classified as doubtful does not remove the Group's entitlement to interestincome; it merely casts doubt on whether the Group will be able to collect it. The Grouphas adopted the approach that once a loan is classified as non-performing, interest will besuspended and will cease to accrue, irrespective of whether any collateral would be adequate tocover such payments.

Write-OffA classified account is written off where there is no realisable tangible collateral securing theaccount and all feasible avenues of recovery have been exhausted, or where the borrower andguarantors have been bankrupted, wound-up, proof of debt filed and all legal costs settled.Approval from MAS must be obtained before accounts that fall within the list of MAS Notice 606,such as director-related loans, can be written off.

Risk Management

28

Loan RecoveryClassification Expectation Provision––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Substandard > 90% to 100% 10% to 25% of any unsecured loan outstandingDoubtful 50% to 90% 50% to 75% of any unsecured loan outstandingLoss < 50% 100% of any unsecured loan outstanding

Group Non-Performing Loans (NPLs) and Cumulative ProvisionsGroup NPLs fell by $289 million or 4.8% to $5,679 million as at 31 December 2002, ascompared to $5,968 million as at 31 December 2001. Greater China and the Five Regional Countrieswere the main contributors to the drop in NPLs. Correspondingly, Group NPLs (excluding debtsecurities) as a percentage of gross customer loans decreased by 0.3% point, from 9.3% as at31 December 2001 to 9.0% as at 31 December 2002. Of the total Group NPLs of $5,679 million,$3,619 million or 63.7% were in the Substandard category. The Group continues toadopt a cautious stance on the selection of credits in the face of global and regionaleconomic uncertainties.

The Group's specific provision increased by $180 million or 9.5% to $2,079 million, as comparedto $1,899 million as at 31 December 2001. As a result, total cumulative specific and generalprovisions for the Group increased by $170 million or 5.1%, from $3,334 million as at 31 December2001 to $3,504 million as at 31 December 2002. General provision was $1,425 million or 40.7%of total cumulative provisions as at 31 December 2002. The total cumulative provisions provided61.7% cover against Group NPLs. For NPLs classified as Doubtful and Loss, the provision coveragestood at 170.1%.

The Group's comparative NPLs by loan classification and cumulative specific and general provisionswere as follows:


• Loss NPLs • Doubtful NPLs • Substandard NPLs • Specific Provision • General Provision

$ m

illio

n

6000

5000

4000

3000

2000

1000

0

1,537

174751

2,462

768

896

1,664

3,851

1,620

1,435

1,899

4,039

384

1,548

1,428

1,975

3,403 3,504

497

5,968

3,334

5,971

3,619

1,613

5,679

1,425

2,079

447

Group Non-Performing Loans and Cumulative Provisions

31.12.00 31.12.01 30.6.02 31.12.02

Ratios (%) 31.12.02 30.6.02 31.12.01 31.12.00––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NPLs*/Gross customer loans 9.0 9.5 9.3 7.8

Cumulative provisions/NPLs 61.7 57.0 55.9 67.6

Cumulative provisions/Doubtful & Loss NPLs 170.1 176.1 157.5 179.9

Cumulative provisions/Unsecured NPLs 138.3 132.2 136.6 136.6

Cumulative provisions*/Gross customer loans 5.5 5.4 5.2 5.2

General provision*/Gross customer loans(net of specific provision*) 2.4 2.4 2.3 2.5

NPLs/Total assets 5.3 5.5 5.2 3.7

* Excluding debt securities.

Group NPLs and Cumulative Provisions of the Five Regional CountriesNPLs of the Five Regional Countries decreased further to $1,458 million as at 31 December 2002from $1,600 million as at 31 December 2001. NPLs as a percentage of gross exposure to the regiondropped to 8.5%, as compared to 8.9% as at 31 December 2001.

Cumulative specific and general provisions for the Five Regional Countries stood at $1,215 millionas at 31 December 2002. The cumulative provisions represented 83.3% of the total NPLs of theFive Regional Countries and 177.9% of the NPLs of the Five Regional Countries that were classifiedas Doubtful and Loss.

General provision was $515 million (31 December 2001: $527 million) against specific provisionof $700 million (31 December 2001: $691 million).

Risk Management

30


484

408

436

447

730

218

652

527

691

1,218

867

533

1,555

516

703

1,215

37

929 883

1,600

155

775

551

1,458

515

700

1,219

132$ m

illio

n

1600

1200

800

400

0

Non-Performing Loans and Cumulative Provisions of the Five Regional Countries

31.12.00 31.12.01 30.6.02 31.12.02

Ratios (%) 31.12.02 30.6.02 31.12.01 31.12.00––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NPLs*/Gross customer loans 17.0 18.4 19.2 22.2

Cumulative provisions/NPLs 83.3 78.4 76.1 95.0

Cumulative provisions/Doubtful & Loss NPLs 177.9 177.2 140.0 198.4

Cumulative provisions*/Gross customer loans 14.1 14.4 14.7 21.1

General provision*/Gross customer loans(net of specific provision*) 6.6 6.7 7.0 11.7

NPLs/Gross exposure to the Five Regional Countries 8.5 8.8 8.9 9.1


Group NPLs and Cumulative Provisions of Greater ChinaAs at 31 December 2002, Group NPLs of Greater China fell by $180 million or 49.7% to $182 millionfrom $362 million as at 31 December 2001. Correspondingly, NPLs as a percentage of grossexposure to Greater China dropped to 2.4% as compared to 5.7% as at 31 December 2001.

In line with the lower NPLs, Group cumulative specific and general provisions for Greater China decreasedto $99 million as at 31 December 2002. The NPLs of Greater China were 54.4% covered by cumulativeprovisions. NPLs classified as Doubtful and Loss were 145.6% covered by cumulative provisions.

Group NPLs by RegionThe 4.8% drop in Group NPLs was primarily due to the lower NPLs of Greater China and of theFive Regional Countries. Singapore and the Five Regional Countries accounted for 69.3% and25.7% of Group NPLs respectively.

Ratios (%) 31.12.02 30.6.02 31.12.01 31.12.00––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

NPLs*/Gross customer loans 7.3 8.1 12.4 11.5Cumulative provisions/NPLs 54.4 51.1 44.5 75.2Cumulative provisions/Doubtful & Loss NPLs 145.6 127.5 112.6 91.9Cumulative provisions*/Gross customer loans 4.0 4.1 5.5 8.6General provision*/Gross customer loans

(net of specific provision*) 1.2 1.3 1.2 1.1NPLs/Gross exposure to Greater China 2.4 3.1 5.7 4.5



$ million 31.12.02 30.6.02 31.12.01 31.12.00––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Singapore 3,935 4,017 3,819 1,354––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Malaysia 943 984 1,028 528Indonesia 156 169 169 119Philippines 208 235 242 181Thailand 144 159 151 101South Korea 7 8 10 –

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Five Regional Countries 1,458 1,555 1,600 929––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Greater China 182 227 362 121––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Others 104 172 187 58––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Group Total 5,679 5,971 5,968 2,462––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Non-Performing Loans and Cumulative Provisions of Greater China

22

25

11

80

219

73

70

33

128

161 136

31

227

35

81

99

74

12191

362

60

114

32

182

30

69

116

36


$ m

illio

n

400

300

200

100

031.12.00 31.12.01 30.6.02 31.12.02

Group NPLs by IndustryGroup NPLs by industry were as follows:

Group Specific Provision by Loan ClassificationAbout 77.6% of specific provision made for expected loan losses was for 'Loss' accounts. Thespecific provision for each classified loan grade is shown in the following chart:

Risk Management

32

$ m

illio

n

2100

1800

1500

1200

900

600

300

0

42113

741

896

162

1,465

189

1,554

272

1,899 1,975

232

172

1,613

2,079

294

Specific Provision by Loan Classification

31.12.00 31.12.01 30.6.02 31.12.02

• Loss NPLs • Doubtful NPLs • Substandard NPLs

31.12.02 30.6.02 31.12.01 31.12.00Amount As % of Amount As % of Amount As % of Amount As % of

($ million) Gross ($ million) Gross ($ million) Gross ($ million) GrossCustomer Customer Customer Customer

Industry Type Loans Loans Loans Loans––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Transport, storage andcommunication 124 6.0 99 4.9 99 4.3 66 9.3

Building and construction 843 9.2 1,108 11.5 1,163 12.0 243 6.8Manufacturing 874 16.2 906 16.3 895 16.8 312 10.5Non-bank financial institutions 1,029 9.5 1,076 9.8 1,022 9.5 447 9.0General commerce 769 12.4 761 12.1 825 13.1 569 14.8Professionals and

private individuals 1,014 10.9 1,006 11.0 939 9.9 408 9.7Housing loans 668 4.8 588 4.3 556 4.2 272 3.6Others 294 5.3 404 7.6 445 6.4 145 3.8––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Sub-Total 5,615 9.0 5,948 9.5 5,944 9.3 2,462 7.8Debt securities 64 23 24 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 5,679 5,971 5,968 2,462––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Group Specific Provision by RegionThe Group's specific provision was $2,079 million as at 31 December 2002. Singapore andthe Five Regional Countries accounted for 61.1% and 33.7% respectively of the Group's totalspecific provision.

Rescheduled and Restructured AccountsA rescheduled account is one where repayment terms have been modified, but the principal termsand conditions of the original contract have not changed significantly. This is done to alleviate atemporary cash flow difficulty experienced by a borrower. It is expected that the problem is short-term and not likely to recur. The full amount of the debt is still repayable and no loss of principalor interest is expected.

When an account has been rescheduled three months before it meets the criteria for auto-classification, the account can be graded as 'Performing'. However, if the rescheduling takes placeafter the account has been graded as 'Non-Performing', it remains as such and is upgraded to'Pass' after six months and provided there are no excesses and past dues.


$ million 31.12.02 30.6.02 31.12.01 31.12.00––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Singapore 1,271 1,153 1,037 353––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Malaysia 428 427 439 242Indonesia 111 117 88 87Philippines 72 70 72 55Thailand 87 87 88 63South Korea 2 2 4 –

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Five Regional Countries 700 703 691 447––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Greater China 69 81 128 80––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Others 39 38 43 16––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Specific Provision for the Group 2,079 1,975 1,899 896General Provision for the Group 1,425 1,428 1,435 768––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 3,504 3,403 3,334 1,664––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Group Specific Provision by Industry

$ million 31.12.02 30.6.02 31.12.01 31.12.00––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Transport, storage and communication 35 27 28 29Building and construction 369 353 336 104Manufacturing 398 371 370 160Non-bank financial institutions 309 317 308 145General commerce 309 296 305 245Professionals and private individuals 329 329 296 151Housing loans 143 108 80 23Others 138 151 161 39––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Sub-Total 2,030 1,952 1,884 896Debt securities 49 23 15 –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 2,079 1,975 1,899 896––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Ageing of NPLsThe full outstanding balance of an account is deemed non-current and aged when there are arrearsin interest servicing or principal repayment. As at 31 December 2002, the ageing of NPLs wasas follows:

A restructured account is one where the original terms and conditions of the facilities have beenmodified significantly to assist the borrower to overcome financial difficulties where the longer-term prospect of the business or project is still deemed to be viable. A restructuring exercise couldencompass a change in the credit facility type, or in the repayment schedule including moratorium,or extension of interest and/or principal payments and reduction of accrued interest, includingforgiveness of interest and/or reduction in interest rate charged.

When an account has been restructured based on financial consideration, the account will begraded as 'Non-Performing'. It can only be upgraded to 'Pass' after six months when all paymentsare current in terms of the restructured terms and conditions and there is no reasonable doubtas to the ultimate collectability of principal and interest.

Loans that were restructured during the year were as follows:

Risk Management

34

31.12.02 30.6.02 31.12.01 31.12.00Ageing Amount % of Amount % of Amount % of Amount % of(Days) ($ million) Total NPLs ($ million) Total NPLs ($ million) Total NPLs ($ million) Total NPLs––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Current 774 13.6 618 10.3 925 15.5 177 7.2≤ 90 473 8.3 505 8.5 874 14.6 280 11.491 to 180 789 13.9 774 13.0 547 9.2 220 8.9≥ 181 3,643 64.2 4,074 68.2 3,622 60.7 1,785 72.5––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 5,679 100.0 5,971 100.0 5,968 100.0 2,462 100.0––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Full Year 2002 First Half 2002 Full Year 2001 Full Year 2000Specific Specific Specific Specific

$ million Amount Provision Amount Provision Amount Provision Amount Provision––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Substandard 292 9 63 2 176 8 17 1Doubtful 29 13 10 5 115 42 – –Loss 37 36 16 16 65 57 4 4––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 358 58 89 23 356 107 21 5––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Collateral TypesThe majority of the classified loans are secured by properties. Properties are valued at forcedsale value and such valuations are updated semi-annually. Other types of collateral includemarketable securities such as listed stocks and shares, cash and deposits, and bankers' standbyletters of credit (SBLCs).

As at 31 December 2002, 55.4% of total Group NPLs was secured by collateral as compared to59.1% as at 31 December 2001.

The secured NPLs of the Group by collateral type based on country of risk were as follows:


Marketable Cash and$ million Properties Securities Deposits Others Total––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

31.12.02Singapore 2,067 86 36 135 2,324Five Regional Countries 569 102 2 43 716Greater China 61 2 – – 63Others 43 – – – 43––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 2,740 190 38 178 3,146––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

30.6.02Singapore 2,232 105 19 105 2,461Five Regional Countries 621 84 3 51 759Greater China 68 5 1 – 74Others 102 – – – 102––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 3,023 194 23 156 3,396––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

31.12.01Singapore 2,282 136 14 64 2,496Five Regional Countries 643 97 3 45 788Greater China 109 11 – 11 131Others 111 – 2 – 113––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 3,145 244 19 120 3,528––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

31.12.00Singapore 770 37 9 34 850Five Regional Countries 324 19 1 17 361Greater China 9 10 – – 19Others 13 1 – – 14––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 1,116 67 10 51 1,244––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Secured/Unsecured NPLs

31.12.02 30.6.02 31.12.01 31.12.00Amount % of Amount % of Amount % of Amount % of

($ million) Total NPLs ($ million) Total NPLs ($ million) Total NPLs ($ million) Total NPLs––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Group NPLsSecured 3,146 55.4 3,396 56.9 3,528 59.1 1,244 50.5Unsecured 2,533 44.6 2,575 43.1 2,440 40.9 1,218 49.5

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 5,679 100.0 5,971 100.0 5,968 100.0 2,462 100.0––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Country RiskInternational lending involves additional risks compared to domestic lending in that there may beimpediments arising from events in a foreign country that prevent repayment of the foreignborrowers' obligations to the Group. Such events may affect all borrowers of the same country.As such, it is important to set limits to safeguard various facets of the Group’s exposures to anysingle country.

Country exposure aggregates all exposures to a particular country, irrespective of whether suchexposures are booked in or outside of that particular country. The exposure may be in the formof actual assets, such as investments, real estate, loan assets, contingent exposures like letters ofcredit and guarantees, other off-balance sheet exposures like foreign exchange contracts, interestrate/currency swaps or collateral/guarantees located in the country to secure exposures bookedin another country.

Cross-border exposure is the summation of all country exposures, including intra-group exposuresbut excluding facilities provided by the Group's branches/subsidiaries to the local incorporationor residual risk remaining within a country.

Setting of Country/Cross-Border LimitsThe review of country and cross-border risk by Risk Management & Compliance Sector – Country& Credit Risk Management is managed through a system of country and cross-border limits, basedon ratings by external rating agencies and internal country credit grading. The latter uses variousquantitative key indicators as well as qualitative factors relating to each country's economic, socialand political circumstances. The scores are averaged and applied to a standard scale to obtain anumeric rating for the country. This numeric rating is then used to determine the appropriate limitsbased on a risk scale that assigns more stringent limits to countries where the Group does nothave a presence. The limit setting process also takes into account the size of the Bank's capital,the perceived economic strength and stability of the borrowing country, and the assessment ofthe Group’s portfolio spread and risk appetite.

Mitigation of Country/Cross-Border RiskThe Group's country and cross-border limits, aimed at avoiding concentration of transfer, economicor political risks, are regularly reviewed and exposure is reported to the Credit Committee at leastfour times a year. Limits may be reviewed and business strategies revised as and when necessary,based on updates by country managers and/or business development managers together with anassessment of current events and developments for each country. The country/cross-border riskceiling is the primary limit for all transactions across all counter-parties. Extension of credit maythus be denied where a country/cross-border risk ceiling is reached although sufficient counter-party limits are available.

Group Exposure by Country of OperationsThe Group's total direct exposure to the countries (outside Singapore) in which it has a presenceamounted to $29.1 billion as at 31 December 2002, or 27% of Group total assets. Exposure(excluding contingent) reported is segregated by loans and advances to customers, balances duefrom banks incorporated in the country, investments and balances due from the government.

Risk Management

36


–––––––––––––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––

Exposure to the Five Regional Countries, Greater China and Others

Loans and Debt Securities Less: Loans/ Net ExposureInvestments in

Subsidiaries % of Group Contingent$ million Non-Bank Government Bank Investments Total & Branches Amount Total Assets Liabilities––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Malaysia31.12.02 6,164 1,990 2,381 530 11,065 1,498 9,567 8.9 1,03230.6.02 6,014 2,648 2,229 615 11,506 1,286 10,220 9.4 87231.12.01 6,493 2,188 2,571 740 11,992 2,017 9,975 8.8 86431.12.00 3,165 993 1,118 470 5,746 579 5,167 7.8 476Indonesia31.12.02 444 127 106 74 751 50 701 0.6 6730.6.02 449 141 98 55 743 32 711 0.6 4831.12.01 331 118 155 55 659 75 584 0.5 2731.12.00 301 45 79 35 460 34 426 0.6 39Philippines31.12.02 254 225 44 10 533 31 502 0.5 5630.6.02 290 200 42 43 575 66 509 0.5 4731.12.01 300 277 46 33 656 65 591 0.5 631.12.00 274 210 102 66 652 150 502 0.8 1Thailand31.12.02 1,178 1,177 112 200 2,667 194 2,473 2.3 28530.6.02 1,127 1,355 279 174 2,935 325 2,610 2.4 28531.12.01 1,026 1,617 567 261 3,471 594 2,877 2.5 18031.12.00 419 1,648 66 190 2,323 165 2,158 3.3 225South Korea31.12.02 45 591 1,354 95 2,085 12 2,073 1.9 25330.6.02 63 241 1,329 204 1,837 404 1,433 1.3 13231.12.01 57 82 888 174 1,201 140 1,061 0.9 22931.12.00 18 51 832 107 1,008 5 1,003 1.5 63––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total RegionalCountries31.12.02 8,085 4,110 3,997 909 17,101 1,785 15,316 14.2 1,69330.6.02 7,943 4,585 3,977 1,091 17,596 2,113 15,483 14.2 1,38431.12.01 8,207 4,282 4,227 1,263 17,979 2,891 15,088 13.2 1,30631.12.00 4,177 2,947 2,197 868 10,189 933 9,256 14.0 804––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Greater China31.12.02 2,482 233 4,311 632 7,658 2,536 5,122 4.8 50430.6.02 2,798 112 3,884 539 7,333 2,501 4,832 4.4 45131.12.01 2,912 135 2,740 590 6,377 1,904 4,473 3.9 44631.12.00 1,052 101 1,328 213 2,694 637 2,057 3.1 177––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Other OECD31.12.02 4,847 105 4,647 687 10,286 1,862 8,424 7.8 87830.6.02 4,151 51 3,645 547 8,394 1,010 7,384 6.8 90831.12.01 4,652 49 6,102 604 11,407 1,307 10,100 8.9 73431.12.00 2,207 32 6,358 138 8,735 262 8,473 12.8 584––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Others31.12.02 154 11 35 4 204 4 200 0.2 4730.6.02 161 11 36 5 213 4 209 0.2 2231.12.01 187 12 44 1 244 4 240 0.2 2731.12.00 7 4 19 – 30 9 21 – 22––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Grand Total31.12.02 15,568 4,459 12,990 2,232 35,249 6,187 29,062 27.0 3,12230.6.02 15,053 4,759 11,542 2,182 33,536 5,628 27,908 25.6 2,76531.12.01 15,958 4,478 13,113 2,458 36,007 6,106 29,901 26.2 2,51331.12.00 7,443 3,084 9,902 1,219 21,648 1,841 19,807 29.9 1,587

At the country level, the largest exposure was to Malaysia where the Group has a long-standingpresence – $9.6 billion or 8.9% of Group total assets as at 31 December 2002. The second largestexposure was to Hong Kong S.A.R., amounting to $2.9 billion or 2.7% of Group total assets.

Included in investments as at 31 December 2002 was an amount of $220.8 million relating to thedealing of debt and equity securities. The following table shows the breakdown of these investments:

Group Cross-Border ExposureAs at 31 December 2002, total direct cross-border exposure to the countries where the Group hasa presence amounted to $18.9 billion. The top three direct cross-border exposure were UnitedKingdom, Hong Kong S.A.R. and USA. The exposure comprised substantially placements withbanks due within one year.

Risk Management

38

$ million Dealing Non-Dealing Investments––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Malaysia 153 377 530Indonesia – 74 74Philippines 1 9 10Thailand 12 188 200South Korea 8 87 95

-------------------------------------------------------------------------------------------------------------------------------––––––––––––––––––––––Five Regional Countries 174 735 909––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Greater China 25 607 632––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Other OECD 22 665 687––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Others – 4 4––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––Total 221 2,011 2,232––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

$ m

illio

n

10000

8000

6000

4000

2000

0

2,7973,299

Top Three Direct Exposure by Country of Operations

Malaysia Hong Kong S.A.R. USA

• 31.12.01 • 31.12.02

3,3682,942

9,9759,567

$ m

illio

n

6000

5000

4000

3000

2000

1000

0

5,873

3,973

3,142

2,5262,804

1,924

Top Three Direct Cross-Border Exposure by Country

United Kingdom Hong Kong S.A.R. USA

• 31.12.01 • 31.12.02

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Cross-Border Exposure to the Five Regional Countries, Greater China and Others

Loans and Debt Securities % of Group

$ million Non-Bank Government Bank Investments Intra-Group Total Total Assets––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Malaysia31.12.02 130 35 471 341 1,393 2,370 2.230.6.02 135 114 448 465 1,134 2,296 2.131.12.01 125 121 442 614 1,679 2,981 2.631.12.00 39 – 390 351 626 1,406 2.1Indonesia31.12.02 226 – 99 74 71 470 0.430.6.02 245 1 86 55 54 441 0.431.12.01 133 – 108 56 41 338 0.331.12.00 99 – 78 34 34 245 0.3Philippines31.12.02 9 16 4 9 34 72 0.130.6.02 26 16 5 43 39 129 0.131.12.01 18 17 10 33 36 114 0.131.12.00 17 1 16 66 86 186 0.3Thailand31.12.02 114 – 44 151 80 389 0.430.6.02 123 – 37 157 253 570 0.531.12.01 136 – 45 231 508 920 0.831.12.00 79 – 36 156 44 315 0.5South Korea31.12.02 36 – 1,116 88 38 1,278 1.230.6.02 57 – 600 185 443 1,285 1.231.12.01 49 – 595 165 170 979 0.931.12.00 17 – 643 107 7 774 1.2––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total RegionalCountries31.12.02 515 51 1,734 663 1,616 4,579 4.330.6.02 586 131 1,176 905 1,923 4,721 4.331.12.01 461 138 1,200 1,099 2,434 5,332 4.731.12.00 251 1 1,163 714 797 2,926 4.4––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Greater China31.12.02 651 – 1,573 167 2,868 5,259 4.930.6.02 788 – 1,240 170 2,963 5,161 4.731.12.01 753 – 1,102 170 2,232 4,257 3.731.12.00 325 – 1,175 219 669 2,388 3.6––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Other OECD31.12.02 420 7 5,901 337 2,238 8,903 8.330.6.02 236 6 5,891 369 1,316 7,818 7.231.12.01 274 7 11,021 364 1,448 13,114 11.531.12.00 394 6 9,743 112 310 10,565 15.9––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Others31.12.02 – – 4 4 101 109 0.130.6.02 – – 3 5 100 108 0.131.12.01 23 – 24 1 100 148 0.131.12.00 2 – 6 – 47 55 0.1––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Grand Total31.12.02 1,586 58 9,212 1,171 6,823 18,850 17.630.6.02 1,610 137 8,310 1,449 6,302 17,808 16.331.12.01 1,511 145 13,347 1,634 6,214 22,851 20.031.12.00 972 7 12,087 1,045 1,823 15,934 24.0


Balance Sheet Risk Management

Balance sheet risk is defined as the potential change in earnings arising from the effect of movementsin interest rates and foreign exchange rates on the structural banking book of the Group that isnot of a trading nature.

The Asset Liability Committee (ALCO), under delegated authority from the Board of Directors,approves the policies, strategies and limits in relation to the management of structural balancesheet risk exposures. This risk is monitored and managed within a framework of approved policiesand advisory limits by Risk Management & Compliance Sector – Asset Liability Management andis reported monthly to ALCO. The decisions of ALCO and its monthly risk management reportsare reviewed by the Executive Committee of the Board and by the Board of Directors. On a tacticallevel, Global Treasury – Asset Liability Management Unit is responsible for the effective managementof the balance sheet risk in the banking book in accordance with the Group's approved balancesheet risk management policies.

In carrying out its business activities, the Group strives to meet customers' demands and preferencesfor products with various interest rate structures and maturities. Sensitivity to interest rate movementsarises from mismatches in the repricing dates, cash flows and other characteristics of assets andliabilities. As interest rates and yield curves change over time, the size and nature of these mismatchesmay result in a gain or loss in earnings. In managing balance sheet risk, the primary objective,therefore, is to monitor and avert significant volatility in Net Interest Income (NII) and EconomicValue of Equity (EVE). For instance, when there are significant changes in market interest rates,the Group will adjust its lending and deposit rates to the extent necessary to stabilise its NII.

The balance sheet interest rate risk exposure is calculated using a combination of dynamic simulationmodelling techniques and static analysis tools, such as maturity/repricing schedules. The schedulesprovide a static indication of the potential impact on interest earnings through gap analysis of themismatches of interest rate sensitive assets, liabilities and off-balance sheet items by time bands,according to their maturity (for fixed rate items) or the remaining period to their next repricing(for floating rate items).

In general, interest rate risk will arise when more assets/liabilities than liabilities/assets are repricedin a given time band of a repricing schedule. A positive interest rate sensitivity gap exists wheremore interest sensitive assets than interest sensitive liabilities reprice during a given time period.This tends to benefit NII when interest rates are rising. Conversely, a negative interest rate sensitivitygap exists where more interest sensitive liabilities than interest sensitive assets reprice duringa given time period. This tends to benefit NII when interest rates are falling. Interest ratesensitivity may also vary during repricing periods and among the currencies in which the Grouphas positions. The table in Note 44(c) to the Financial Statements represents the Group's interestrate risk sensitivity based on repricing mismatches as at 31 December 2002. The Group had anoverall positive interest rate sensitivity gap of $7,488 million, which represents the net differencein the interest rate sensitive assets and liabilities across the time periods. The actual effect on NIIwill depend on a number of factors, including variations in interest rates within the repricingperiods, variations among currencies, and the extent to which repayments are made earlier or laterthan the contracted dates. The interest rate repricing profile, which includes lending, funding andliquidity activities, typically leads to a negative interest rate sensitivity gap in the shorter term.

Risk Management

40

Complementing the static analysis is the dynamic simulation modelling process. In this process,the Group applies both the earnings and EVE approaches to measuring interest rate risk. Thepotential effects of changes in interest rates on NII are estimated by simulating the future courseof interest rates, expected changes in the Group’s business activities over time, as well as the effectof embedded options in the form of loans subject to prepayment and of deposits subject topreupliftment. The changes in interest rates include the simulation of changes in the shape of theyield curve, high and low rates, and implied forward interest rates.

EVE is simply the present value of the Group’s assets less the present value of the Group's liabilities,currently held by the Group. In EVE sensitivity simulation modelling, the present values for all theGroup's cash flows are computed, with the focus on changes in EVE under various interest rateenvironments. This economic perspective measures interest rate risk across the entire time spectrumof the balance sheet.

Stress testing is also performed regularly on balance sheet risk to determine the sensitivity of theGroup's capital to the impact of more extreme interest rate movements. This stress testing isconducted to assess that even under more extreme market movements, for example, the Asiancrisis, the Group's capital will not deteriorate beyond its approved risk tolerance. Such tests arealso performed to provide early warning of potential worst-case losses so as to facilitate proactivemanagement of these risks in the rapidly changing financial markets. The results of such stresstesting are presented to ALCO, the Executive Committee of the Board and the Board of Directors.

The risks arising from the trading book in interest rates, foreign exchange rates and equity pricesare managed and controlled under the market risk framework that is discussed under the section'Market Risk Management' on pages 44 to 47.

Liquidity Risk Management

Liquidity risk is defined as the potential loss arising from the Group’s inability to meet its contractualobligations when due. Liquidity risk arises in the general funding of the Group's activities and inthe management of its assets. The Group maintains sufficient liquidity to fund its day-to-dayoperations, meet customer deposit withdrawals either on demand or at contractual maturity, meetcustomers’ demand for new loans, participate in new investments when opportunities arise, andrepay borrowings as they mature. Hence, liquidity is managed to meet known as well as unanticipatedcash funding needs.

Liquidity risk is managed in accordance with a framework of liquidity policies, controls and limitsapproved by ALCO. These policies, controls and limits ensure that the Group maintains welldiversified sources of funding, as well as sufficient liquidity to meet all its contractual obligationswhen due. The distribution of sources and maturities of deposits is managed actively in order toensure cost effective and continued access to funds and to avoid a concentration of funding needsfrom any one source. Important factors in assuring liquidity are competitive pricing in interest ratesand the maintenance of customers' confidence. Such confidence is founded on the Group's goodreputation, the strength of its earnings, and its strong financial position and credit rating.


The management of liquidity risk is carried out throughout the year by a combination of cash flowmanagement, maintenance of high quality marketable securities and other short-term investmentsthat can be readily converted to cash, diversification of the funding base, and proactive managementof the Group's 'core deposits'. 'Core deposits' is a major source of liquidity for the Group. These'core deposits' are generally stable non-bank deposits, like current accounts, savings accounts andfixed deposits. The Group monitors the stability of its 'core deposits' by analysing their volatilityover time.

In accordance with the regulatory liquidity risk management framework, liquidity risk is measuredand managed on a projected cash flow basis. The Group is required to monitor liquidity under'business as usual' and ‘bank-specific crisis' scenarios. Liquidity cash flow mismatch limits havebeen established to limit the Group’s liquidity exposure. The Group has also identified certain earlywarning indicators and established the trigger points for possible contingency situations. Theseearly warning indicators are monitored closely so that immediate actions can be taken. On atactical daily liquidity management level, Global Treasury – Asset Liability Management Unit isresponsible for effectively managing the overall liquidity cash flows in accordance with the Group'sapproved liquidity risk management policies and limits.

Liquidity contingency funding plans have been drawn up to ensure that alternative fundingstrategies are in place and can be implemented on a timely basis to minimise the liquidityrisks that may arise upon the occurrence of a dramatic change in market conditions. Under theplans, a team comprising senior management and representatives from all relevant units will directthe business units to take specified actions to create liquidity and continuous funding for theGroup's operations.

Overseas banking branches and subsidiaries must comply with the regulatory requirements withregards to liquidity and will operate on being self-sufficient in funding capabilities, wheneverpossible. However, the Group’s Head Office in Singapore will provide funding to them on anexceptional basis, for instance, during a stressed liquidity crisis when they are unable to borrowsufficient funds for their operational needs or when it is cheaper to fund through Head Office.

The table in Note 44(d) to the Financial Statements shows the maturity mismatch analysis ofthe Group's nearer and longer-term time bands relating to the cash inflows and outflows basedon contractual classifications arising from business activities. The projected net cash outflowin the 'Up to 7 Days' time band comprises mainly customers' current accounts and savingsaccounts that are repayable on demand. However, when these customer deposits are adjustedfor behavioural characteristics, the projected net cash outflow in the 'Up to 7 Days' time band isvery much reduced as they are adjusted out to the longer-term time bands due to the stable natureof these customer deposits.

Risk Management

42

Sources of DepositsThe Group has access to diverse funding sources. Liquidity is providedby a variety of both short-term and long-term instruments. The diversityof funding sources enhances funding flexibility, limits dependence onany one source of funds, and generally lowers the overall cost of funds.In making funding decisions, management considers market conditions,prevailing interest rates, liquidity needs, and the desired maturity profileof the Group's liabilities.

Non-bank customers' fixed deposits, savings and other deposits continuedto form a significant part of the Group’s overall funding base in the yearunder review. These customer deposits amounted to $67,919 millionas at 31 December 2002 and accounted for 78% of total Group deposits.Bankers' deposits, on the other hand, amounted to $19,302 millionand formed the remaining 22% of total Group deposits. In termsof deposit mix, fixed deposits comprised the majority of thefunding base at 54%, followed by savings and other deposits at 24%.Bankers' deposits are also used by the Group to capitalise on moneymarket opportunities and to maintain a presence in the inter-bankmoney market.


Sources of Deposits2002

$ million %–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Customer depositsFixed deposits 47,287 54Savings and other

deposits 20,632 24–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

67,919 78Bankers' deposits 19,302 22–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total deposits 87,221 100–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

–––––––––––––––––––––––––––––

Sources of Deposits – 2002

22%

54%

24%

• FixedDeposits

• Savings andOther Deposits

• Bankers'Deposits

Sources of Deposits2001

$ million %–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Customer depositsFixed deposits 54,419 59Savings and other

deposits 20,033 21–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

74,452 80Bankers' deposits 18,093 20–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total deposits 92,545 100–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

–––––––––––––––––––––––––––––

Sources of Deposits – 2001

20%

59%

21%

• FixedDeposits

• Savings andOther Deposits

• Bankers'Deposits

Market Risk Management

Market risk is defined as the potential loss in market value of a given portfolio that can be expectedto be incurred arising from changes in market prices, namely, interest rates, foreign exchange rates,equity prices and option volatility relating to all the above rates or prices.

The Group is exposed to market risk in its trading portfolio because the values of its tradingpositions are sensitive to changes in market prices and rates.

Market risk is managed using a framework of market risk management policies and risk controlprocedures, as well as notional, greeks, risk and loss limits. These limits are proposed by everytrading desk/division (including the Group's overseas operations), reviewed by Risk Management& Compliance Sector – Market Risk Management and approved by ALCO annually. ALCO alsoreviews and approves new limits or changes to existing limits as and when these are proposed.The powers of ALCO are delegated by the Executive Committee of the Board whose powers are,in turn, delegated by the Board of Directors. The monitoring of market risk trading limits and thereporting of any limit excess and ratification are carried out independently by the Business AreaControl Unit.

There is no single risk statistic that can reflect all aspects of market risk. The most commonapproaches are Value-at-Risk (VaR) and stress testing. These risk measures, taken together, providea more comprehensive view of market risk exposure than any one of them individually. VaR is ameasure of the dollar amount of potential loss from adverse market movements under a normalmarket environment. Statistical models of risk measurement, such as VaR, provide an objectiveand independent assessment of how much risk is being taken. They also allow consistent andcomparable measurement of risk across financial products and portfolios.

Market risk is measured using VaR methodologies, namely, variance-covariance and historicalsimulation models based on historical market data changes for the past 260 days within a 95%confidence level and assuming a one-day trading horizon.

The variance-covariance methodology is a parametric approach that assumes that returns arenormally distributed. Under this methodology, a matrix of historical volatilities and correlations iscomputed from the past 260 days' market data changes. VaR is then computed by applying thesevolatilities and correlations to the current portfolio valued at current price levels.

The historical simulation methodology is a non-parametric approach that does not make anyunderlying assumption about the distribution of returns. The method assumes that actual observedhistorical changes in market rates, such as interest and foreign exchange rates, reflect futurepossible changes. It uses historical price changes for the past 260 days to compute the returns ofthe portfolio and a VaR figure is then obtained from the actual distribution of these returns of theportfolio based on a 95 percentile.

Risk Management

44

The VaR calculations are performed for all material trading portfolios.

However, there are certain limitations to the VaR methodologies. They do not reflect the extentof potential losses that may occur beyond the 95% confidence level or that may occur for positionsthat could not be liquidated within the one-day trading horizon. In addition, historical data maynot accurately reflect price changes that are likely to occur in the future and all VaR methodologiesare dependent on the quality of available market data. Hence, to evaluate the reasonableness ofthe VaR model, daily 'back testing' of VaR estimates are conducted against hypothetical and/oractual financial results. In this regard, the Group has, in 2002, established a Back Testing Policy,approved by ALCO, to formalise back testing guidelines and procedures.

To overcome the limitations of VaR as well as to complement VaR, stress and scenario tests areperformed on the trading portfolios. This will serve to provide early warning of potential worst-case losses so as to facilitate proactive management of these risks in the rapidly changing financialmarkets. While VaR estimates the Group's exposure to events in normal markets, stress testingdiscloses the risk under plausible events in abnormal markets. Portfolio stress testing is integral tothe market risk management process and, together with VaR, are important components in riskmeasurement and control tools.

During the year under review, a Stress Testing Policy, approved by ALCO, was established to formalisestress testing guidelines and procedures. The Group's corporate stress tests are built around changesin market rates and prices that result from pre-specified economic scenarios, such as historicalmarket events, as well as hypothetical sensitivity analysis.

Some examples of stress tests that are performed include daily worst-case VaR based on theworst price changes experienced within the past 260 days and on historical events, forinstance, the 1997/1998 Asian financial crisis, the 2000/2001 New Economy crisis and theJune - August 2002 Investor Confidence crisis. Hypothetical sensitivity analysis includes parallelyield curve shifts for various currencies.

As with VaR, stress test calculations are performed for all material trading portfolios.

The VaR, stress and scenario testing results are reported to ALCO, the Executive Committee of theBoard and the Board of Directors in accordance with the frequency that they meet.


The risks taken by the Group are measured against corresponding rewardsto ensure that returns are commensurate with the risks taken. A risk-reward measure of Earnings-at-Risk (EaR) is used as a standard measurementof the risks against corresponding rewards across different products andbusiness types. EaR is used as a benchmark in the setting of risk limitsagainst prospective earnings.

Value-at-Risk (VaR)The risk taken by the Group, as reflected by the level of VaR, is dependenton the level of exposure taken by the Group and the level of marketprices for the relevant period that is used in the computation of VaR.

The Group's daily VaR, as at 31 December 2002, was $6.5 million andcomprised mainly interest rate risk (50%), foreign exchange risk (35%)and equity/volatility risk (15%).

The Group's daily VaR for 2002, averaging $7.6 million, ranged betweena low of $5.9 million and a high of $10.1 million:

% of Total VaR 31.12.02 High Low Average–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Interest rate 50 37 51 47Foreign exchange 35 44 44 39Equity/volatility 15 19 5 14––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total VaR (%) 100 100 100 100–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total VaR+ ($ million) 6.5 10.1 5.9 7.6–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Risk Management

46

% of Total VaR* 31.12.01 High Low Average–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Interest rate 46 30 48 46Foreign exchange 46 33 46 27Equity/volatility 8 37 6 27–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total VaR (%) 100 100 100 100–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total VaR+ ($ million) 5.6 10.9 4.5 6.8––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

* Excluding OUB Group.+ Diversified across risk categories.

35%50%

15%

Group Daily VaR as at 31.12.02

• Foreign ExchangeRisk

• InterestRate Risk

• Equity/Volatility Risk

46%46%

8%

Group Daily VaR as at 31.12.01*

• Foreign ExchangeRisk

• InterestRate Risk

• Equity/Volatility Risk

The Group's daily trading income for 2002, averaging $0.88 million, ranged between a low of$(4.6) million and a high of $5.5 million:


Num

ber

Of

Day

s

Group Daily VaR Distribution for 2002

VaR ($ million)

<5.5 5.5-6 6-6.5 6.5-7 7-7.5 7.5-8 8-8.5 8.5-9 9-9.5 9.5-10 10-10.5 >10.5

75

60

45

30

15

0

70

05

28

54

1915

2328

72 0

Number Of Days: 251

Minimum: $5.9 millionMaximum: $10.1 millionAverage: $7.6 million

Num

ber

Of

Day

s

Group Daily VaR Distribution for 2001*

VaR ($ million)

<4 4-4.5 4.5-5 5-5.5 5.5-6 6-6.5 6.5-7 7-7.5 7.5-8 8-8.5 8.5-9 9-9.5 9.5-10 10-10.5 10.5-11 >11

60

50

40

30

20

10

0

54

0 1

10

52

15 1714 12

22 2117

10

41 0

Number Of Days: 250

Minimum: $4.5 millionMaximum: $10.9 millionAverage: $6.8 million

* Excluding OUB Group.

Num

ber

Of

Day

s

Group Daily Trading Income Distribution for 2002

Profit And Loss ($ million)

(6)-(5) (5)-(4) (4)-(3) (3)-(2) (2)-(1) (1)-0 0-1 1-2 2-3 3-4 4-5 5-6 6-7

75

60

45

30

15

0

22

0 15

10

38

60

37

139

30

Number Of Days: 251

Minimum: $(4.6) millionMaximum: $5.5 millionAverage: $0.88 million

53

Operational Risk Management

Operational risk is defined as the potential loss arising from a breakdown in the Group's internalcontrol or corporate governance that results in error, fraud, failure/delay to perform, or compromiseof the Group's interests by employees. Operational risk also includes the potential loss arising froma major failure of computer systems and from both natural and man-made disasters. Potential lossmay be in the form of financial loss or other damages, for example, loss of reputation and publicconfidence that will impact the Group's credibility and ability to transact, maintain liquidity andobtain new business.

Operational risk is managed through a framework of policies, techniques and procedures asapproved by the Management Committee under its delegated authority from the Board of Directors.The decisions of the Management Committee and its monthly risk management reports arereviewed by the Executive Committee of the Board.

This framework of techniques and procedures encompasses the building of Operational Risk Profiles(ORPs), the conduct of Operational Risk Self Assessment (ORSA) based on the ORPs, the developmentof an Operational Risk Action Plan (ORAP), the monitoring of Key Operational Risk Indicators(KORIs), and the process for monitoring and reporting operational risk issues.

The methodology provides the tool for the profiling of significant operational risks to whichbusiness and support units are exposed. These units then define the key management policies/procedures/controls that have been established to address the identified operational risks. Thebuilding of the ORPs involves risk identification as well as the identification and classificationof management controls.

As part of the continual assessment, ORSA provides the business/support heads with an analyticaltool to identify the wider operational risks, assess the adequacy of controls over these risks, andidentify control deficiencies at an early stage so that timely action can be taken.

Where actions need to be taken, these are documented in the form of an ORAP for monitoringand reporting to top management.

Complementing the framework are KORIs that are utilised and monitored on an on-going basis.Through regular monitoring and analysis of this data, areas of potential operational control weaknesscan be identified at an early stage.

Included in the overall framework of operational risk is the disciplined product programme process.This process aims to ensure that the risks associated with each new product/service are identified,analysed and managed before it is approved for launch.

For the implementation of all online products and services, extra precautionary measures are takento address and protect customers' confidentiality and interests. Clear instructions are also postedon the Group's website to advise and educate customers on the proper use and safekeeping oftheir access identification and passwords.

Risk Management

48

As part of the Group's comprehensive operational risk framework, an enhanced Group-wideBusiness Contingency Plan has been developed. In addition, in line with the increasing need tooutsource internal operations in order to achieve cost efficiency, a Group policy has been establishedto regulate the outsourcing of services to third parties.

Risk transfer mechanisms, such as insurance, also form part of this framework. Identified operationalrisks with relatively high residual risk assessment ratings and new risks that are beyond the controlof the Group will be scrutinised for insurability.

Legal risk is part of operational risk. Legal risk arises from inadequate documentation, legal orregulatory incapacity or insufficient authority of customers and uncertainty in the enforcement ofcontracts. This is managed through consultation with the Group’s legal counsel and external counselto ensure that legal advice is appropriately taken where necessary.

Group Compliance

The Group operates in an environment that is subject to a significant number of regulatory andoperational compliance requirements. Risk Management & Compliance Sector – Group Complianceis primarily responsible for ensuring that the appropriate control measures are in place for theGroup to be reasonably assured that its businesses and operations are conducted in accordancewith the relevant laws, regulations, policies and procedures. Where there are no explicit requirements,the Group adopts policies and procedures that are in line with best practices in the industry.

Group Compliance achieves its objectives through a team of dedicated Compliance Officers inkey business lines and support units, including the Group's overseas branches and subsidiaries.These Compliance Officers monitor and enforce compliance with the relevant laws, regulations,policies and procedures in their respective areas, and report to the Head of Group Compliancewho provides them with independent support and guidance to perform their tasks.

Group Compliance also spearheads the Group's efforts in ensuring that its businesses are notinvolved with money laundering and terrorist financing activities by issuing guidelines for businessunits to follow and by conducting reviews of compliance with these guidelines. Training sessionsare also held to create and heighten staff awareness on the prevention of money laundering andterrorist financing activities.

Besides ensuring the on-going compliance with local regulations, Group Compliance also oversawthe smooth delivery of the requirements under the US Patriot Act in 2002.

Effective from 1 October 2002, the new Financial Advisers Act 2001 (FAA) imposes stringentrequirements on the provision of investment advice to customers, with particular emphasis onproduct disclosure and suitability of recommendation. The main intent of the FAA is to boost theprofessional standards of the financial advisory industry in Singapore and improve investor protection.In this regard, Group Compliance has worked with the relevant business units to develop aframework of guidelines and procedures that comply with the FAA requirements.

49UNITED OVERSEAS BANK

50

2002 was a year of exciting developments for UOB. It was marked by the successful

integration of Overseas Union Bank, the merger of Industrial & Commercial Bank,

and by new initiatives to realise our business synergies and to lay the foundations

for the future growth of the Bank.

Grow our shareholder value

Our priority, in seeking to serve our customers and deliver value for ourshareholders, is to remain committed to our growth, both organically andthrough strategic alliances.

United for Growth

On 16 June, we completed the crucial integration of the

operations and IT systems of Overseas Union Bank (OUB)

into UOB. The consolidation of the two banks was achieved

in just eight months instead of the originally estimated

12 to 18 months. The integration has added considerable

distribution strength to our consumer market and brought

together a greater diversity of products and services for our

customers.

The year also saw the merger of our banking subsidiary,

Industrial & Commercial Bank (ICB), into UOB. Another listed

subsidiary, Overseas Union Trust, was privatised and delisted

from the Singapore Exchange in December. These exercises

are part of our on-going efforts to consolidate our subsidiaries

for greater efficiency and competitiveness.

Individual Banking

Our Individual Banking business covers personal financial

services and private banking. Our personal financial services

include personal deposits, loans, investments, credit and

debit cards, and privilege banking.

Our substantial customer base expanded further and this

business performed strongly in 2002. Net profit before tax

grew by 8.6%, reflecting improved contributions from credit

cards and higher net interest income from an enlarged loans

portfolio.

2002 in Review

Personal Financial Services

The addition of OUB's consumer portfolio has strengthened

our leadership in the area of personal financial services. In

the cards business, we remain Singapore's largest provider

of credit and Visa debit cards and continue to gain market

share in this area. By end-2002, our base of 800,000 credit

cards and 300,000 Visa debit cards issued represented a

share of 26% and 54% of the market respectively.

Our initiatives in 2002 were directed not only at growing

business volume and fee income but also at expanding our

product array and improving the customer experience. These

included the following:

• Launch of our 'Power Of 2' campaign to share the benefits

of the UOB-OUB integration with our enlarged customer

base.

• Launch of the UOB Visa Business Card, an effective

payment tool designed to cater to the increasingly

sophisticated needs of Singapore's small and medium-

sized enterprises (SMEs), thus enabling them to achieve

substantial operational efficiency and savings in their day-

to-day business costs.

• Launch of the MTV Card, the first UOB Credit Card that

complements the lifestyle aspirations of today's youth.

• Introduction of derivative products and alternative

investments to our Privilege Banking clients.

• Investment in a bank-wide Customer Relationship

Management (CRM) programme that will lead to higher

customer satisfaction levels, deeper customer relationships

and greater customer retention. With a customer-centric

infrastructure and the capability to deliver consolidated

information about the customer to the point of service

(single customer view), the new CRM programme will be

an invaluable tool in supporting our focus to offer services

and products that anticipate and satisfy each customer's

special needs and requirements.

• An extensive renovation programme for our branch

network in Singapore that focuses on establishing, growing

and preserving the customer's wealth and, at the same

time, builds a strong and consistent UOB identity.

Private Banking

Private Banking ended 2002 with an expanded client base

and a robust 80% growth in assets under its management.

It also made progress in developing an open product

architecture where proprietary products are supplemented

by high quality products from third party providers.

Consequently, the range of services for our Private Banking

clients has widened to include alternative investments such

as hedge funds and structured products.

Institutional Banking

Institutional Banking encompasses three business portfolios,

namely, commercial credit, corporate banking and capital

markets. In 2002, these businesses together recorded a

good growth of 35.0% in net earnings before tax, driven

The celebratory light-up linking UOB Plaza and OUB Centrewas a fitting symbol of the successful integration of theoperations and systems of UOB and OUB.

The UOB Visa Business Card is an efficient financial tooldesigned to cater to the needs of local SMEs.


2002 in Review

by higher interest income earned from loans and advances

and increased contributions from capital market activities.

Commercial Credit

Commercial credit, which embraces our SME business, is

one of our traditional strengths.

We continue to maintain our market leadership in financing

to this customer segment because of our vast regional

reach, broad range of products, improved services, and local

knowledge.

In 2002, the roll out of our new Business Internet Banking

service saw the provision of a suite of online offerings for

our commercial customers, including cash management,

payment and trade transactions.

Corporate Banking

Corporate banking provides a full spectrum of banking

products and services to middle-market and large local

corporate groups, including non-bank financial institutions.

Our portfolio is characterised by a diversified base of

customers. This has allowed us to segmentise our customer

relationships by industry groupings, both for greater client

focus and long-term banking relations.

In 2002, we took advantage of the relatively quiet market

to reinforce long-standing relationships and to expand

selectively into targeted industrial sectors, including

proactively identifying lending opportunities presented by

the regionalisation plans and overseas investments of

our customers.

Noteworthy deals and initiatives in 2002 included:

• Participating as a lead-arranger and underwriter in

a US$600 million five-year term loan facility for

UMCi Pte Ltd to finance Phase One of its proposed

US$3.6 billion wafer fabrication plant in Singapore.

• Participating as a lead-arranger in a US$300 million four-

year term loan and three-year revolving credit facilities for

Systems on Silicon Manufacturing Company Pte Ltd to

finance the company's capital expenditure for the expansion

of wafer capacity.

• Participating as a lead-arranger in the issue and

underwriting of a $400 million bond by Tuas Power Pte Ltd

to finance the Stage Two construction of its power plant.

• Putting into place a structured finance team to pursue

opportunities in a variety of financial products and

structures, such as credit default swaps and callable asset

swaps, in the primary and secondary credit market.

• Expanding our e-commerce solutions to include a greater

range of cash management and business internet banking

52

UMCi's 300-mm wafer fabrication plant in the Pasir RisWafer Fab Park is the world's most advanced semi-conductor fab. Its construction was financed through asyndicated loan facility in which we were a lead-arrangerand underwriter.

UOB Asia, our investment banking arm, continues tosupport the development of the Singapore bond marketwith its participation in Singapore's second Islamicbond issue for Majlis Ugama Islam Singapura.

Strategic partnerships with established global financialinstitutions, like Deutsche Bank, allow us to acceleratethe growth of our Collateralised Debt Obligation business.

services so as to meet the increasingly sophisticated needs

of our major corporate and financial clients.

Capital Markets

Our capital market and corporate finance activities are

conducted through our investment banking arm, UOB Asia.

The subsidiary had an active year in 2002 despite the

challenging market conditions. In terms of the number of

deals, it earned a joint second-place ranking in both the

domestic Initial Public Offering (IPO) and domestic rights

issue league tables with a 22% and 18% market share

respectively.

Some of the year's key transactions were as follows:

• Appointed as the Co-ordinator of the public offer in

Singapore for the MobileOne Ltd IPO, the largest IPO

since 1999.

• Appointed as Manager of the IPOs for seven companies

across multiple business sectors, including those for

Europtronic Group Ltd, aspnetcentre Ltd, Cortina Holdings

Limited and Raffles LaSalle Limited.

• Appointed as Manager for the rights issues for Hotel

Negara Limited, Meiban Group Ltd and Vertex Venture

Holdings Ltd.

• Appointed as Financial Advisor in relation to Panpac

Media.com Limited's acquisition of Auston Technology

Group Pte Ltd.

• Appointed as Independent Financial Advisor to the

independent directors of CWT Distribution Limited in

respect of the conditional cash offer by PSA Logistics Pte

Ltd in the takeover of CWT Distribution Limited.

• Arranged and managed a $451 million asset backed bond

issue for Upperton Holdings Limited.

• Jointly lead-managed Singapore's second Islamic bond

issue for Majlis Ugama Islam Singapura, a statutory body.

Global Treasury

Global Treasury performed significantly better in 2002.

Despite the global economic downturn and an increasingly

difficult operating environment, we continued to build on

our strengths and to capitalise on our competitive advantage

in strategic markets. Net profit before tax rose by 30.1% to

a record $347 million, reflecting a broad-based improvement

in performance in our key lines of business and the

effectiveness of cost-saving measures. We benefited

substantially from the favourable global interest rate

environment, high value-added securitisation activities like

product structuring, and cross-marketing initiatives to

customers.

Our other achievements during 2002 included:

• Successfully structuring two managed synthetic investment

grade Collateralised Debt Obligations (CDOs) with a

combined notional value of US$3.03 billion. This is in line

with our strategy to develop CDOs as one of our core

businesses, by entering into strategic partnerships with

established global financial institutions.

• Doubling the issuance of ARCHER asset backed commercial

paper, and broadening its investor base.

• Designing and customising an expanded range of products

to serve the specific financing, investment and risk

management needs of our regional clients.

• Expanding our treasury franchise in the region.

• Enhancing our e-trading capabilities to provide a wider

range of web-based transactions for our customers.

Going forward, growth for our global treasury operations

will hinge on the realisation of two important strategic goals:

• Increasing the contributions from our Overseas Treasury

Centres while continuing to substantially boost our earnings

from the domestic market. We will do this by supporting

the commercial and funding requirements in these centres,

and identifying and developing profitable market niches

in these locations.

• Achieving a more balanced income ratio for our trading

and non-trading activities by honing our ability to structure

products with regional and global potential and maximising

value to the services that we offer our clients.


Investment Banking

Investment Banking comprises our asset management,

venture capital management, proprietary investment and

insurance activities. Against a lacklustre global equities

market, higher provisions were made for a diminution in

the value of our investments in 2002. This impacted the

profitability of our investment banking businesses as a

whole. Consequently, net profit before tax was 55% lower

than in 2001.

Asset Management

Our assets under management and advice and committed

capital grew to $15.6 billion at end-2002 despite a difficult

year. Assets under management amounted to $15.2 billion

while committed capital totalled $360 million.

The growth was driven by several major initiatives and

achievements from our investment management subsidiaries

in Singapore, Malaysia, Taiwan, France and USA.

UOB Asset Management

• Appointed as the Collateral Manager for two CDO

transactions – United Global Investment Grade CDO I

(US$1.33 billion) and United Global Investment Grade

CDO II (US$1.7 billion) – that invest in a portfolio of global

investment grade credit default swaps. With 12 CDOs

now under its management and advice, UOB Asset

Management (UOBAM) has become one of Asia's leading

managers of CDOs and CBOs (Collateralised Bond

Obligations).

• Launched three new unit trusts and consolidated the

20 funds under the management of OUB Optimix Funds

Management. This brings the total number of funds and

sub-funds under its management to 55 by year-end, with

assets under management totalling $1.4 billion. The three

new unit trusts comprised two guaranteed funds, and a

54

2002 in Review

Grow our customers

Our trained Personal Bankers provide financial solutions, with personal attention,to satisfy the wider and growing financial needs of our customers.

core investment product called GrowthPath. GrowthPath

is a single yet broadly diversified investment portfolio that

dynamically adjusts its asset allocation with time. It is the

first such product to be introduced to the Singapore

market. Investing in a combination of global equities and

global bonds, GrowthPath offers a choice of five portfolios

that are tailored for investors with different time horizons

and different risk tolerance levels.

• Won five out of 22 awards in the Standard & Poor's

Investment Funds Award Singapore 2003 and an award

in the Standard & Poor's Investment Funds Award 2003

in Taiwan.

• Won 10 out of 33 awards in the Singapore Investment

Fund Awards 2002.

• Entered into an agreement with New York-based PlusFunds

Group Inc. and Standard & Poor's to provide a unique

index product for the growing hedge funds business in

Singapore and other selected Asian markets. The agreement

was negotiated and structured with the assistance of

UOB Global Capital.

UOB-OSK Asset Management

• Won two mandates from a major local asset management

firm in Malaysia to manage retail funds.

UOB Venture Management

• Managed five funds totalling $360 million in committed

capital.

• Established a RMB300 million investment company in

Beijing with Oxford Cambridge Investment Group, Beijing

and Shandong Hi-Tech Investment Company Limited to

invest in Chinese companies that have the potential

to achieve high growth over the medium to long

term. UOB Investment Consultancy (Beijing) Limited, a

subsidiary of the Group, is the advisor to the investment

company.

• Set up an offshore fund company, UOB Venture (Shenzhen)

Limited, in the Republic of Mauritius to invest in promising

high growth technology and technology-related projects

in China, following an investment agreement with

Shenzhen Venture Capital Co., Ltd (SZVC) [now known

as Shenzhen Capital Group Co., Ltd]. The fund is managed

by SZVC-UOB Venture Management Co., Ltd, a joint

venture fund management company between UOB and

SZVC in China.

UOB Global Capital

• Built on its relationship with the Kinetics Group and further

developed its hedge fund products to capitalise on the

growing investor trend towards absolute return products.

Assets under management have grown substantially from

a prestigious investor base.

• Achieved a final close for the UOB Hermes Asia Technology

Fund, raising US$68.5 million from major institutional

investors in the USA, Europe and Asia. The Fund is being

advised by UOB Venture Management.

International Operations

Our overseas network outside Singapore comprises more

than 180 offices in 17 countries and territories, operating

in the Asia-Pacific region, Western Europe and North

America.

GrowthPath – a core investment product – offers customersa new way of investing, by providing them with a frameworkto build and grow their investment portfolios.

Our subsidiary, UOB Asset Management, is Singapore'smost awarded fund manager, having won more than50 performance awards since 1996.


The year also marked an important step forward for our

strategies to enhance our non-interest revenue base and

our domestic capital market capabilities, as evident from

the following:

• In November, we started a joint venture with the

DRB-HICOM Group to develop life and general insurance

businesses in Malaysia, particularly via the bancassurance

channel.

• We completed two notable transactions during the year,

namely, RM798 million and RM200 million in refinancing

for Lingkaran Trans Kota Sdn Bhd and MHS Aviation

Berhad respectively.

Thailand

UOB Radanasin Bank (UOBR) closed 2002 with a customer

loans portfolio of THB26.8 billion ($1.1 billion), an increase

of 25.3% over the previous year. This, together with

improved fee income from our investment banking,

treasury and personal financial services, helped to

reduce UOBR's net loss for

the year to THB194 million

($7.8 million) from THB669

million ($28 million) in 2001.

Our vision is to be a premier bank in the Asia-Pacific and to

achieve it, we remain focused on our strategy to grow our

business in Greater China and ASEAN.

We improved both the performance and profitability of our

overseas business in 2002 despite testing economic

conditions. Net profit from our overseas operations, including

ACU, contributed 36.3% to Group total profit, an increase

of 7.1% points over 2001 and bringing us closer to our goal

of 40% by 2010.

Malaysia

Our operations in Malaysia, covering principally those of the

United Overseas Bank (Malaysia) [UOBM] group and UOB

Labuan Branch, recorded an increase in net profit after tax

of 92.9% to RM311 million ($142 million) in 2002. The

growth was driven by an enhanced revenue stream from

an enlarged customer base following the completion of our

merger of Overseas Union Bank (Malaysia) [OUBM] into

UOBM in February. The successful integration of OUBM has

also resulted in an expanded branch network, cost savings

through streamlined operations and positioned us to compete

more effectively in a challenging marketplace.

With higher productivity and the more efficient use of capital,

UOBM is now ranked among the top commercial banks in

Malaysia in terms of ROE.

56

2002 in Review

In China, our presence was strengthened with theupgrading of our representative office in Beijing to afull-service branch.

In Hong Kong S.A.R., our UOB Credit Cards are wellreceived despite the keen competition from a wide arrayof providers in the territory.

In Indonesia, our banking subsidiary– PT Bank UOB Indonesia (UOBI) –opened its eighth office in thecountry. UOBI Kelapa Gading issituated in a popular residentialdistrict in Jakarta.

We are focused on being more customer-driven, on product innovation, andon growing the range of services we provide to our customers.

In line with the growth of exports and domestic demand

in the country, our trade finance and personal financial

services businesses performed notably well. In trade finance,

we continued to register high growth in the areas of packing

credit, trust receipts, import letters of credit and export

bills negotiation. In personal financial services, housing

and personal loans, credit cards and debit cards remained

our key focus. Our total card base stood at 215,000 by

end-2002, representing an impressive year-on-year increase

of 106%.

We also made significant investments in enhancing our

technology and operational infrastructure that will help us

to deliver better customer service. A major initiative was

the migration of our core banking system to a more scalable

and flexible platform that is aligned to the system at Head

Office, Singapore. This two-year project was successfully

completed in December at an investment of THB200 million

($8 million).

Indonesia

Our Indonesian operations reported marginally better

gains in 2002, with net profit after tax at IDR77.8 billion

($15.1 million).

In September, we increased our shareholding in our banking

subsidiary, PT Bank UOB Indonesia, from 80% to 99%

through purchasing the stake held by our joint venture

partner, PT Bank Bali Tbk. We also expanded our presence

in Indonesia when PT Bank UOB Indonesia opened its eighth

office in the country in December. These developments

reflect our commitment to Indonesia and the importance

that we place in delivering a comprehensive range of banking

services to customers in this major regional market.

Grow our services


Philippines

A milestone for us in 2002 was the completion of our

purchase of an increased stake in United Overseas Bank

Philippines (UOBP) from 60% to 100%. The acquisition has

made UOBP the foreign bank with the largest network of

67 branches in the country and reinforced our strategy to

be a major player in the region. It is also expected to improve

our ability to generate stable core deposits.

With the prevailing tough economic and business conditions

in the Philippines, we remain cautious in our expansion

plans. Net loss incurred in 2002 was largely unchanged

from 2001, and resulted primarily from a small loans portfolio

and greater investment to improve our infrastructure.

Greater China

We made good progress in strengthening our presence and

scope of business in Greater China, one of our key growth

markets. Several milestones were achieved in 2002, including

the following:

• Upgrading of UOB Beijing Representative Office to a full-

service branch. This brings our total network in China to

five branches and one representative office and makes it

one of the most comprehensive among foreign banks in

China.

• Approval for a full foreign currency licence for

UOB Shanghai Branch to offer foreign currency banking

services to local individuals and local companies in China.

58

• Approval for UOB Shenzhen Branch to offer Renminbi

banking services to foreign individuals, foreign enterprises

and foreign joint venture companies, making us the first

bank in Singapore to do so in Shenzhen.

• Approval for UOB Shanghai Branch to act as an Authorised

Approving Centre for Capital Account, making us the first

South-East Asian bank that is authorised to approve and

handle capital account transactions in Shanghai.

• Launch of the UOB Credit Card in Hong Kong S.A.R.,

which is in line with our long-term vision to develop

our personal financial services business in Hong Kong

S.A.R. and China.

Other International Businesses

Our other international operations continued to register

strong performance in 2002. The growth was led by better

margins and higher fee income from our corporate lending

activities. A notable highlight during the year was the

conversion of our wholly-owned banking subsidiary,

United Overseas Bank (Canada), to a full-service branch,

UOB Vancouver Branch.

Technology

Significant investment has been made, and will continue to

be made, in technology to enhance our competitive

advantage. In 2002, our technology spending amounted

to $199 million, or 18.6% of total Group expenses.

A major achievement in 2002 was the smooth completion

of the integration of the UOB and OUB IT systems. The

2002 in Review

We are the first Singapore bank to have our Operations SectorISO 9001:2000 certified, following the implementation of aquality management system for our processes and a frameworkfor continuous improvement.

The completion of the integration of the IT systems andoperations of UOB and OUB, well ahead of schedule, testifiesto the hard work and dedication put in by staff and to theirstrong sense of teamwork.

exercise, achieved well ahead of the original schedule, has

successfully aligned the systems and processes between the

two organisations. It also provided us with the opportunity

to upgrade our technology infrastructure for improved

robustness and performance.

Other key initiatives during the year were:

• Development of a bank-wide Customer Relationship

Management (CRM) programme that involves the

reengineering of business processes and changes in the

organisation structure. The aim is to foster a customer-

centric culture across the Bank and provide a high and

consistent service level to our customers across all our

touchpoints. Integral to the CRM initiative is the

development of a Contact Management System for our

sales and service force, and a Wealth Management System

to meet customers' wealth acquisition and wealth

preservation needs more comprehensively.

• Implementation of a value-based management system

that provides a framework to sharpen management focus

on the key drivers of customer and product profitability

and, ultimately, on returns to shareholders.

• Installation of real-time recovery capabilities for our key

systems which are essential to the business continuity

plans of all our business and support units, both in

Singapore and overseas.

Operations

The Operations Sector was formed on 2 January to centralise

all our banking processes. This is fundamental to achieving

economies of scale and greater operational efficiency within

the Bank.

Grow our staff

We provide ample training opportunities for staff to grow individually andprofessionally, thereby building a quality team with the relevant skills to meetthe needs of our customers and business.


60

To this end, Operations Sector consolidates the processing

functions in the areas of cheques, branch backend activities,

loan applications and disbursements, trade finance,

remittances, treasury settlement, custody services, funds

administration and unit trust registry services. In all these

functions, we adopt the best-in-class solutions to achieve

operational excellence.

Besides the integration of the processing functions of OUB

into UOB and ICB into UOB in 2002, we also launched the

'Towards Operational Excellence' programme to put in place

best practices for the delivery of quality services, build a

platform for reengineering internal processes for efficiency

and initiate the hubbing of our regional operations to

Singapore. As part of this programme, we initiated the

following:

• Implementation of a quality management system for our

processes as well as a framework for continuous

improvement. This led us to become the first Singapore

bank to have our entire Operations Sector ISO 9001:2000

certified.

• Implementation of a business process reengineering

exercise to streamline and redesign our processes. The

objective was to lower our unit operating cost through

increased straight-through processing and quality service

delivery at the right costs – first time, on time and every

time.

• Launch of a hubbing programme across the countries

and territories that we span. Using technology and

leveraging on the increased economies of scale achieved

in Singapore, the processing activities of our overseas

branches will be progressively transferred into Singapore

so that standard quality processing at lower costs can be

achieved on a regional level. Hubbing will also lead to

greater business opportunities for our branches overseas

as they will have the capabilities to bring more new

products to the market, and to do so with greater speed

and effectiveness.

We also implemented the first Continuous Linked Settlement

(CLS) utility in the world together with two other Singapore

banks. As a CLS Settlement Member, we are now able to

settle cross-border multi-currency transactions within the

day, on a payment-versus-payment basis. This eliminates

the settlement risk caused by delays arising from time-zone

differences and, consequently, reduces transaction costs.

Accolades

Our strong financial performance, commitment to provide

quality services and excellent investor relations, as well as

efforts in building a strong brand led to the following

prestigious awards in 2002:

• Bank Of The Year – Singapore (The Banker – Awards 2002)

• Best Domestic Commercial Bank – Singapore for the

second successive year (The Asset – Triple A: Asset Asian

Awards 2003)

• Best Local Bank – Singapore (FinanceAsia – Country Awards

For Achievement 2002)

• 'Most Progress In Investor Relations' and 'Best

Communications During A Takeover' (Investor Relations

Magazine – Asia Awards 2002)

• Winner (International Enterprise Singapore – Singapore

Brand Award 2002)

• Top Rated for custody services for the third successive

year (Global Custodian – Agent Bank Survey 2002)

• 'Star' Ratings for the third year running for settlement

efficiency, safekeeping and overall performance in custody

services (GSCS Benchmarks – 2002 Review Of Subcustodian

Services).

Staff

We continue to place a high value on staff development,

and we seek to build a quality team with the right skills and

talent to meet our current and future business needs.

2002 was a year where we concentrated not only on

integration and consolidation but also on ensuring that our

human resource framework has efficient systems and

2002 in Review

processes in place that will support our quest to be a premier

bank in the Asia-Pacific region. Towards this end, key projects

for the year included:

• Enhancing our performance management system so as

to promote a strong bank-wide culture of performance

excellence and the alignment of individual performance

goals with the Bank's business goals and objectives.

• Implementing an advanced web-based HR management

system that allows staff to perform a range of employee-

related functions online.

• Continuing to equip staff with the tools and skills they

need to achieve excellence in their areas of work expertise.

In 2002, the number of training places rose by 144%,

while training programmes covered courses on new

products and systems to those on performance

management and quality awareness.

Grow our community

Community

We continue to serve the community through philanthropic

and sponsorship activities. The arts remain one of our

principal areas of support.

Through our annual UOB Painting Of The Year Competition

and Exhibition, we have helped hundreds of promising artists

in Singapore gain recognition for their works. We are also

a Founding Corporate Patron of the Esplanade – Theatres

on the Bay.

We continue our sustained programme to support localarts through initiatives such as our annual UOB Painting OfThe Year Competition and Exhibition, which entered its21st year in 2002.

Winning the inaugural Singapore Brand Award 2002affirms our commitment and efforts in making theUOB brand synonymous with quality service andinnovative products.


Group Financial Review

Review of Financial Performance

• Highlights and Performance Indicators 63

• Merger of OUB into UOB 64

• Swift Integration of OUB into UOB 64

• Group Profits 65

• Financial Ratios 65

• Net Interest Income 65

• Non-Interest Income 67

• Operating Expenses 68

• Provisions Charged to Income Statement 70

Overview of Balance Sheet

• Total Assets 71

• Securities 71

• Customer Loans 72

• Deposits 74

• Loans/Deposits Ratio 74

• Shareholders' Funds 74

Capital Adequacy Ratios 75

Certain figures in this section may not add up to the relevant totals

due to rounding.

Certain comparative figures have been restated to conform with the

current year’s presentation.

Certain comparative figures for 2001 have been restated for impact of

adopting the revised Singapore Statement of Accounting Standard

(SAS) 12: Income Taxes and Interpretation of SAS (INT) 5: Consolidation

– Special Purpose Entities.

United fo r Growth

Review of Financial Performance

Highlights and Performance Indicators



* Including three months’ profit contribution from OUB Group.

Increase/ 2002 2001* Decrease (%)–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Key Indicators

Net interest income (NII) ($ million) 2,169 1,429 + 51.8

Non-interest income ($ million) 910 795 + 14.5–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total income ($ million) 3,079 2,224 + 38.4

Total expenses ($ million) 1,074 874 + 22.9–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Operating profit before goodwill and provisions ($ million) 2,005 1,350 + 48.5

Net profit after tax (NPAT) ($ million) 1,064 925 + 15.1

NPAT (excluding goodwill) ($ million) 1,260 972 + 29.6

Income mix:

Net interest income/Total income (%) 70.4 64.3 + 6.1% points

Non-interest income/Total income (%) 29.6 35.7 - 6.1% points

100.0 100.0 –

Profit (before tax and goodwill) contribution:

Onshore (%) 63.7 70.8 - 7.1% points

Offshore (including ACU) (%) 36.3 29.2 + 7.1% points

100.0 100.0 –

Return on average shareholders' funds (ROE) (%) 8.3 10.8 - 2.5% points

ROE (excluding goodwill) (%) 9.8 11.3 - 1.5% points

Earnings per share (EPS)

Basic (cents) 67.7 77.3 - 12.4

Excluding goodwill (cents) 80.2 81.3 - 1.4

Return on average total assets (ROA) (%) 0.98 1.16 - 0.18% point

ROA (excluding goodwill) (%) 1.16 1.22 - 0.06% point

NII/Average interest bearing assets (%) 2.26 2.06 + 0.20% point

Expense/Income ratio (%) 34.9 39.3 - 4.4% points

Increase/ 2002 2001 Decrease (%)–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Other Indicators

Customer loans (net) ($ million) 58,884 60,892 - 3.3

Customer deposits ($ million) 67,919 74,452 - 8.8

Loans/Deposits ratio+ (%) 86.7 81.8 + 4.9% points

Non-performing loans (NPLs) ($ million) 5,679 5,968 - 4.8

Cumulative provisions ($ million) 3,504 3,334 + 5.1

NPLs#/Gross customer loans (%) 9.0 9.3 - 0.3% point

Cumulative provisions/NPLs (%) 61.7 55.9 + 5.8% points–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total assets ($ million) 107,469 113,888 - 5.6

Shareholders' funds ($ million) 12,653 12,717 - 0.5

Unrealised surplus from revaluation** ($ million) 1,186 1,398 - 15.2

Net asset value (NAV) per share ($) 8.05 8.09 - 0.5

Revalued NAV per share ($) 8.81 8.98 - 1.9–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Capital adequacy ratios (BIS) (%)

Tier 1 capital 12.2 11.8 + 0.4% point

Total capital 15.3 18.5 - 3.2% points

Dividend rates (%)

Interim 15.0 15.0 –

Interim dividend in specie 18.8 – + 18.8% points

Final 25.0 25.0 –

Manpower (number) 10,320 12,142 - 1,822number

Merger of OUB into UOBOverseas Union Bank (OUB) was acquired and became a subsidiary of the Group on20 September 2001. It was subsequently merged into the Bank on 2 January 2002. Accordingly,the financial statements of the Group for 2002 reflect the full year impact of the enlarged operationswhile those of the Group for 2001 included only the last three months' results of the OUB Group.The financial data in this report should therefore be viewed within this context.

Swift Integration of OUB into UOBOn 16 June 2002, the Group successfully completed the integration of the operations and ITsystems of OUB into UOB. The consolidation of the two banks was achieved in just eight monthsinstead of the originally estimated 12 to 18 months.

With integration swiftly completed, the Group is on track to achieve cost savings of approximately$250 million from the consolidation of the two banks. On the revenue side, the Group will lookto realise revenue synergies from an enlarged customer base.

+ Loans refer to net customer loans while deposits refer to customer deposits.# Excluding debt securities.

** Not incorporated into the accounts and excludes the revaluation surplus/deficit from investment in associates.

64


Group ProfitsThe Group achieved a profit growth of 15.1% for 2002, with net profitafter tax reaching $1,064 million. The increase was mainly the resultof higher net interest income, higher fee and commission income, gainson the divestment of Haw Par Corporation, as well as higher profitsfrom associates. These were partially offset by lower dealing income,higher operating expenses, higher goodwill amortisation charge andhigher specific provision for loans.

At the operating level, the Group's operating profit beforegoodwill amortisation and provisions increased by 48.5% over 2001to $2,005 million in 2002. The increase reflects our robust incomegrowth and realised cost savings from integration.

Financial Ratios• Earnings per share (excluding goodwill) decreased by 1.4%, from

81.3 cents to 80.2 cents in 2002. The price over earnings per share(P/E) ratio, based on the Bank's last done share price of $10.50 on27 February 2003, was 13.1.

• Return on average shareholders' funds (excluding goodwill), at 9.8%,decreased by 1.5% points from 11.3% in 2001.

• Net asset value (NAV) per share decreased by $0.04 or 0.5%, from$8.09 in 2001 to $8.05 in 2002.

• Total dividend, including the dividend in relation to the distributionin specie of shares of Haw Par Corporation, was 58.8% (2001: 40%),representing a dividend cover of 1.5 times (2001: 2.2 times). Excludingthe dividend in specie, the dividend of 40% for 2002 was 2.2 timescovered by net profit.

Net Interest IncomeNet interest income for the Group rose 51.8%, from $1,429 million in2001 to $2,169 million in 2002. Net interest income continued to bethe major contributor of total income, accounting for about 70.4%(2001: 64.3%) of total income.

The higher net interest income was largely attributable to a larger loanbase resulting from the acquisition of OUB, and an improved averageinterest margin.

The average interest margin increased by 20 basis points, from 2.06%in 2001 to 2.26% in 2002, primarily due to the lower cost of funds.

Net Interest Income (NII) Ratios

NII/Average InterestBearing Assets

NII/Total Income

%

2000 2001 2002

2.5

2.0

1.5

1.0

0.5

0

2.222.06

2.26100

80

60

40

20

%63.0 64.370.4

$ m

illio

n

1200

900

600

300

0

583 615 588

841

1,0801,089

1,198

1,429

2,169

Net Interest Income

2000 2001 2002

• 1st Half • 2nd Half


––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––2002 2001

Average Average Average AverageBalance* Interest Interest Rate Balance* Interest Interest Rate

$ million $ million % $ million $ million %–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Assets

Interest bearing

Customer loans 60,221 2,811 4.67 38,378 2,184 5.69

Inter-bank balances andbalances with central banks 22,589 546 2.42 22,831 952 4.17

Government securities 10,155 240 2.36 6,711 195 2.90

Dealing and investment securities 3,215 156 4.85 1,551 83 5.34–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total interest bearing assets 96,180 3,752 3.90 69,471 3,413 4.91–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Non-interest bearing

Cash and balances with central banks 2,273 2,268

Investments in associates 1,631 1,717

Fixed assets 1,688 1,301

Goodwill 3,756 791

Other assets 3,617 2,415–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total non-interest bearing assets 12,965 8,492–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total assets 109,145 77,963–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Liabilities

Interest bearing

Customer deposits 68,646 1,066 1.55 49,315 1,319 2.67

Inter-bank balances 20,255 396 1.96 16,120 612 3.80

Debts issued 3,221 121 3.76 1,223 53 4.36–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total interest bearing liabilities 92,122 1,583 1.72 66,658 1,984 2.98–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total non-interest bearing liabilities 3,725 2,772–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total liabilities 95,847 69,430–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Net interest income 2,169 1,429–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Average interest margin+ 2.26 2.06–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

* Computed based on monthly average.+ Average interest margin represents net interest income as a percentage of total interest bearing assets.

Average Interest Rates and Margin

66


Non-Interest IncomeThe Group's non-interest income for 2002 accounted for 29.6% oftotal income. Total non-interest income rose by $115 million or 14.5%to $910 million in 2002.

The increase in total non-interest income was primarily attributable tohigher fee and commission income, as well as higher profits on the saleof investment securities and associates. Included in the profits on thesale of associates was a gain on the divestment of Haw Par Corporationof $65 million. The higher non-interest income was, however, partiallyoffset by lower dealing income from securities, derivatives and foreignexchange, as well as lower profits on the sale of properties.

Analysis of Changes in Net Interest Income

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Composition of Non-Interest Income

2002 2001Volume Rate Net Volume Rate NetChange Change Change Change Change Change

$ million $ million $ million $ million $ million $ million–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Interest bearing assetsCustomer loans 1,243 (616) 627 622 (295) 327Inter-bank balances and

balances with central banks (10) (396) (406) 226 (270) (44)Government securities 100 (55) 45 30 (2) 28Dealing and investment securities 89 (16) 73 22 27 49

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total interest bearing assets 1,422 (1,083) 339 900 (540) 360–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Interest bearing liabilitiesCustomer deposits 516 (769) (253) 352 (290) 62Inter-bank balances 157 (373) (216) 206 (192) 14Debts issued 87 (19) 68 53 – 53

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total interest bearing liabilities 760 (1,161) (401) 611 (482) 129–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Increase/2002 2001 (Decrease)

$ million $ million %––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Fee and commission incomeCredit card 96 64 50.6Fund management 74 53 40.8Futures broking and stockbroking 49 33 48.6

Investment-related 29 14 109.6Loan-related 86 61 41.4Service charges 44 35 25.4Trade-related 101 80 25.7Others 21 15 35.7

501 355 40.9Dividend and rental income 110 110 0.6Other operating income 299 330 (9.3)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total non-interest income 910 795 14.5––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

%

50

40

30

20

10

37.0 35.7

29.6

Non-Interest Income/Total Income

2000 2001 2002

$ m

illio

n

600

450

300

150

0

364340

362

433

524

386704

795

910

Non-Interest Income

2000 2001 2002



Operating ExpensesTotal operating expenses for 2002 increased by $200 million or 22.9%over 2001. Both staff expenses and other operating expenses rose in2002 largely due to the expanded operations resulting from the acquisitionand consolidation of OUB into the Group.

Expense to income ratio improved from 39.3% in 2001 to 34.9% in2002. The improvement reflected the cost savings achieved from theswift integration of OUB into the Group as well as the continued carefulmanagement of expenses by the Group.


$ million $ million %–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Gains/(Losses) from:

Dealing in securities, governmenttreasury bills and securitiesand derivatives 58 80 (28.0)

Dealing in foreign exchange 82 137 (40.0)

Dealing income 140 217 (35.6)

Sale of investment securitiesand associates 78 16 386.7

Sale of subsidiaries * (7) 100.0

Sale of properties and otherfixed assets 12 40 (71.2)

Others 70 63 9.6

Others 159 113 41.1–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total other operating income 299 330 (9.3)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

* Less than $500,000.

Other Operating Income

%

50

40

30

20

10

39.5 39.3

Expenses/Income

2000 2001 2002

$ m

illio

n

Total Operating Expenses

2000 2001 2002

600

450

300

150

0

385366

514

360

527 547


751

8741,074


$ million $ million %––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Staff expenses 536 443 21.2

Other operating expenses 538 431 24.7––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total operating expenses 1,074 874 22.9––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

34.9

68


Cost Savings from IntegrationThe Group realised cost savings of approximately $195 million in 2002.With integration swiftly completed, the Group is on track to achievean annual pre-tax cost savings of approximately $250 million.

Other Operating ExpensesOther operating expenses were up by $107 million to $538 million in2002, mainly driven by higher depreciation expenses on land andbuildings and other fixed assets, higher rental and maintenance costs,higher advertising and promotional expenses, as well as higher commissionand brokerage expenses.

IT operating expenses for 2002 increased by $46 million from 2001 toreach $199 million, and accounted for 18.6% of total Group expenses.

$ m

illio

n

300

250

200

150

100

50

0

70

195

250

Cost Savings

Realised Realised Target1st Half 2002 Full Year 2002 2003


$ m

illio

n

Group IT Operating Expenses

2000 2001 2002

120

90

60

30

0

6353

93

60

10297

116

153199

%

21

18

15

12

9

6

15.5

18.6

Group IT Operating Expenses/Total Expenses

2000 2001 2002

17.5


Provisions Charged to Income StatementThe total provision charge at $451 million in 2002 was $286 millionhigher than in 2001. The increase was dominated by higher specificprovisions made on loans that were necessitated by lower collateralvalue in a lacklustre property market and uncertain economic conditions.

First Second Full First Second Full Half Half Year Half Half Year

2002 2002 2002 2001 2001 2001$ million $ million $ million $ million $ million $ million

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

The Group

Specific provision for loans 191 231 422 22 143 165

General provision for loans – – – (16) (54) (70)

Specific provision for diminutionin value of other assets (34) 64 30 5 65 70

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total provisions 157 294 451 11 154 165––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Provisions charged by major region:

Specific provision for loans

Five Regional Countries* 25 8 33 12 (29) (17)

Greater China+ (35) (4) (39) (14) (6) (20)

Singapore and other countries 201 227 428 24 178 202––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

191 231 422 22 143 165––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

General provision for loans

Five Regional Countries* (11) 9 (2) (22) (52) (74)

Greater China+ 2 (4) (2) 5 – 5

Singapore and other countries 9 (5) 4 1 (2) (1)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

– – – (16) (54) (70)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Specific provisions for diminutionin value of other assets (34) 64 30 5 65 70

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total provisions 157 294 451 11 154 165––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

* The Five Regional Countries comprise Malaysia, Indonesia, the Philippines, Thailand and South Korea.+ Greater China comprises China, Hong Kong S.A.R. and Taiwan.


$ m

illio

n

Provisions Charged to Income Statement

2000 2001 2002

400

300

200

100

0

68

23 11

154

294

157

451

165

91

70


Overview of Balance Sheet

Total AssetsThe Group's total assets as at 31 December 2002 were $107,469 million,a decrease of $6,419 million or 5.6% since 31 December 2001. Thefall was largely due to lower inter-bank balances and muted loandemand.

Assets Mix

SecuritiesTotal Group securities fell by $482 million or 3.3% to $14,159 millionas at 31 December 2002, compared with $14,641 million as at31 December 2001. The decrease arose primarily from reducedholdings in government treasury bills and securities.

Total Securities

2002 2001

$ million % $ million %––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Cash and balances withcentral banks 4,213 3.9 3,330 2.9

Securities* 14,159 13.2 14,641 12.9

Inter-bank balances 19,426 18.1 24,746 21.7

Customer loans 58,884 54.8 60,892 53.5

Other assets 7,120 6.6 6,503 5.7

Goodwill 3,666 3.4 3,777 3.3––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total assets 107,469 100.0 113,888 100.0––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

* Comprising Singapore and other government treasury bills and securities, dealing and

investment securities.

–––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––

2002 2001$ million $ million

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Cost

Dealing 828 1,129

Non-dealing 13,473 13,687––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

14,301 14,816

Less: Provision for diminution in value (142) (175)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Net book value 14,159 14,641––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Assets Mix – 2002

• Cash andBalances withCentral Banks

• Securities • Inter-BankBalances

• Customer Loans • Other Assets • Goodwill

Assets Mix – 2001Assets Mix – 2001

• Cash andBalances withCentral Banks

• Securities • Inter-BankBalances

• Customer Loans • Other Assets • Goodwill


Customer LoansThe Group's net loans and advances to customers as at 31 December 2002 were $2,008 millionor 3.3% lower than as at 31 December 2001. This resulted mainly from a decrease in theterm loans and overdraft portfolios which was partially offset by an increase in the housingloans portfolio.

Customer Loans by Type

Securities Analysed by Industry

Securities Analysed by Issuer Type

2002 2001

$ million % $ million %––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Government 9,594 67.1 10,561 71.2

Public sector 8 0.1 52 0.4

Bank 652 4.6 915 6.2

Corporate 3,564 24.9 3,162 21.3

Others 483 3.3 126 0.9––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total 14,301 100.0 14,816 100.0–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

–––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––

2002 2001

$ million % $ million %––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Transport, storage and communication 559 4.2 508 3.7

Building and construction 321 2.4 348 2.6

Manufacturing 606 4.5 224 1.6

Financial institutions 1,537 11.4 1,357 9.9

General commerce 72 0.5 90 0.7

Government 9,416 69.9 10,173 74.3

Others 962 7.1 987 7.2––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Non-dealing 13,473 100.0 13,687 100.0

Dealing 828 1,129––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total securities 14,301 14,816–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

–––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––

2002 2001

$ million % $ million %––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Housing loans (13,841) 22.2 13,298 20.7

Term loans 35,253) 56.5 36,940 57.5

Trade financing 2,915) 4.7 2,825 4.4

Overdrafts 10,330) 16.6 11,148 17.4––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total gross customer loans 62,339) 100.0 64,211 100.0

Less: General provision (1,425) (1,435)

Specific provision andinterest-in-suspense (2,030) (1,884)

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Net customer loans 58,884) 60,892–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

–––––––––––––––––––––––––––––––––––––– ––––––––––––––––––––––––––––––––––––––

72


For a breakdown of Group loans and advances by remaining maturity and industry, please referto Notes 28(b) and 28(c) to the Financial Statements respectively.

Credit Facilities to Related Parties The Group has granted credit facilities to the following related parties in the ordinary courseof business on normal terms and conditions. The outstanding amounts of these credit facilitiesas at 31 December 2002 were as follows:

Gross Customer Loans Analysed by Currency and Fixed/Variable Rates

2002 2001

Fixed Rate Variable Rate Total Fixed Rate Variable Rate Total

$ million $ million $ million $ million $ million $ million–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Singapore Dollars 13,724 27,645 41,369 12,584 29,149 41,733

US Dollars 747 7,391 8,138 1,538 7,902 9,440

Malaysian Ringgit 166 5,762 5,928 79 6,167 6,246

Hong Kong Dollars 40 1,426 1,466 20 1,726 1,746

Thai Baht 534 501 1,035 573 294 867

Others 1,059 3,344 4,403 582 3,597 4,179––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Group Total 16,270 46,069 62,339 15,376 48,835 64,211––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

–––––––––––––––––––––––––––––––––––––––––--------–––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––––--------––––––––––––––––––––––

2002 2001

Loans Off-Balance Loans Off-Balanceand Sheet Credit and Sheet Credit

Advances Facilities* Advances Facilities*

$ million $ million $ million $ million––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Associates of the Group

Financial activities 52 15 33 4

Non-financial activities 567 90 925 55–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Directors of the Bank anddirector-related parties+ 792 155 594 173

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Corporations where the directors ofthe Bank are also directors# 2,493 141 1,988 147

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

* Off-balance sheet credit facilities comprise direct credit substitutes, transaction-related contingencies and trade-related contingencies.+ Director-related parties include the immediate family members of the directors of the Bank, entities in which a director of the

Bank or his family members have a substantial shareholding, and credit facilities guaranteed by the directors of the Bank.# This excludes credit facilities already included in the first two categories. However, it includes credit facilities granted to the

subsidiaries of the corporations in this category.

––––––––––––––––––––––––––––––––––––––– –––––––––––––––––––––––––––––––––––––––


DepositsTotal Group deposits fell by 5.8%, from $92,545 million as at31 December 2001 to $87,221 million as at 31 December 2002, duemainly to lower customer fixed deposits. Customer deposits accountedfor 77.9% of total Group deposits.

Deposits by Type

For a breakdown of deposits by remaining maturity, please refer to Note21(a) to the Financial Statements.

Loans/Deposits RatioWith the 8.8% decrease in customer deposits outpacing the 3.3%decrease in net customer loans, the customer loans-to-deposits ratioincreased by 4.9% points from 81.8% as at 31 December 2001 to86.7% as at 31 December 2002.

Shareholders' FundsGroup shareholders' funds stood at $12,653 million as at 31 December2002 as compared to $12,717 million as at 31 December 2001.

Unrealised revaluation surpluses in properties and long-terminvestments*, amounting to $1,186 million as at 31 December 2002,were not incorporated into the Group's accounts.

2002 2001$ million % $ million %

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Bankers' deposits 19,302 22.1 18,093 19.6Customer deposits

Fixed deposits 47,287 54.2 54,419 58.8Savings and others 20,632 23.7 20,033 21.6

67,919 77.9 74,452 80.4––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total deposits 87,221 100.0 92,545 100.0––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

$ m

illio

n

80000

60000

40000

20000

0

30,045

43,406

60,892

74,45267,919

58,884

100

90

80

70

60

%

69.2

81.8

86.7

Loans/Deposits Ratio

2000 2001 2002


–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Shareholders' funds per book 12,653 12,717Add: Surplus on revaluation

(not incorporated in the accounts) 1,186 1,398–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Shareholders' funds includingrevaluation surplus 13,839 14,115

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Net asset value (NAV) per share (in $)NAV per book 8.05 8.09Revaluation surplus 0.76 0.89

–––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total revalued NAV 8.81 8.98––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

* Excluding the revaluation surplus/deficit from investment in associates.

$ m

illio

n

Revalued Shareholders’ Funds

2000 2001 2002

15000

12000

9000

6000

3000

0

6,968

1,398

12,717

$

10.0

9.5

9.0

8.5

8.0

7.5

8,507

14,115 13,839

1,186

12,653

8.988.81

1,539

8.08

• CustomerLoans

• CustomerDeposits

Loans/DepositsRatio

• Shareholders’Funds

• RevaluationSurplus

Revalued NAVPer Share

74


Capital Adequacy Ratios

The Capital Adequacy Ratios (CAR) of the Group were computed in accordance with the guidelinesissued by the Basle Committee on Banking Supervision. The Group's capital management policyis to maintain a strong capital position to support the growth of the Group, both organically andthrough acquisitions. As at 31 December 2002, the Group maintained a strong total capital ratioof 15.3%, which is almost twice the minimum of 8% set by the Bank for International Settlements(BIS), and above the minimum of 12% required by the Monetary Authority of Singapore.

The total capital ratio fell from 18.5% to 15.3%, mainly as a result of the redemption of US$subordinated floating rate notes during the year.


––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

CapitalTier 1 – Core capital

Share capital 1,572) 1,571)Disclosed reserves 10,956) 10,765)Minority interests 150) 399)Less: Goodwill (3,684) (3,777)

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

8,994) 8,958)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Tier 2 – Supplementary capitalRevaluation reserves on investments and properties* 349 671)General loan loss provision+ 920 949)Subordinated notes 1,294 3,638)

––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

2,563 5,258)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Less: Deductions against Capital# (337) (161)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Total capital 11,220 14,055)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Risk-Weighted AssetsTotal risk-weighted assets including market risk 73,574 75,897)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

Capital Adequacy RatiosTier 1 12.2% 11.8%)Total capital 15.3% 18.5%)––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––

* After discount of 55% in accordance with BIS guidelines.+ Excluding specific and earmarked provisions.# Including capital deductions for certain investments.


Financial Statements

Directors' Report 77

Statement by Directors 89

Auditors' Report to the Members of

United Overseas Bank Limited 90

Income Statements 91

Balance Sheets 92

Consolidated Statement of Changes in Equity 94

Statement of Changes in Equity 96

Consolidated Cash Flow Statement 98

Notes to the Financial Statements 99

UNITED OVERSEAS BANK LIMITED(Incorporated in Singapore)

AND ITS SUBSIDIARIES

United fo r Growth


The directors present their report to the members together with the audited financial statements of the Bank and of the Group forthe financial year ended 31 December 2002.

DirectorsThe directors holding office at the date of this report are as follows:

Mr Wee Cho YawMr Lee Hee SengMr Wee Ee CheongMr Koh Beng SengMr Ngiam Tong DowMr Ernest Wong Yuen WengMr Wong Meng MengMr Sim Wong HooMr Philip Yeo Liat KokDr Cham Tao SoonMr Tan Kok QuanProfessor Lim PinMrs Margaret Lien Wen HsienMr Ng Boon Yew

Principal ActivitiesThe Bank is principally engaged in the business of banking in all its aspects. The principal activities of its subsidiaries are set out inNote 46 to the financial statements. There have been no significant changes in the nature of these activities during the financial year,except for the following:

(a) On 2 January 2002, Overseas Union Bank Limited (“OUB”), a wholly-owned subsidiary was merged into the Bank underSection 14A of the Banking Act, Cap. 19. As a result of the merger, the businesses, assets, liabilities, interests, rights, privileges,obligations and commitments of OUB were transferred to and vested in the Bank. The banking licence of OUB was cancelled on2 January 2002 and it has been dormant since then. At an appropriate time, the Bank will apply to the Registrar of Companiesand Businesses for OUB to be dissolved by striking its name off the register under Section 344 of the Companies Act, Cap. 50.

(b) On 3 June 2002, Industrial & Commercial Bank Limited (“ICB”), a wholly-owned subsidiary was delisted from the SingaporeExchange after the Bank acquired the minority shareholders’ interests of 12.55% in ICB. On 28 August 2002, ICB was mergedinto the Bank under Section 14A of the Banking Act, Cap. 19. As a result of the merger, the businesses, assets, liabilities,interests, rights, privileges, obligations and commitments of ICB were transferred to and vested in the Bank. The banking licenceof ICB was cancelled on 28 August 2002 and it has been dormant since then. At an appropriate time, the Bank will apply to theRegistrar of Companies and Businesses for ICB to be dissolved by striking its name off the register under Section 344 of theCompanies Act, Cap. 50.

Acquisitions and Disposals of Subsidiaries(a) Incorporation of a Subsidiary

During the financial year, the Bank incorporated Tye Hua Investments Pte Ltd as a wholly-owned subsidiary of the Bank. The cashconsideration paid by the Bank was $2.

Directors’ Reportfor the financial year ended 31 December 2002

78

Acquisitions and Disposals of Subsidiaries (continued)

(b) Acquisition of SubsidiariesDuring the financial year, the Group acquired the remaining 50% interest in OUB Optimix Funds Management Limited (“OUBOptimix”) for a cash consideration of $2,243,091. The Group’s share of the net tangible assets of OUB Optimix at the date ofacquisition in respect of the 50% acquisition amounted to $957,882.

In addition, the Group also acquired the remaining 50% interest in UOB Investment Consultancy (Beijing) Limited (formerlyknown as UOB Centek Technology (Beijing) Investment Consulting Co., Ltd) for a cash consideration of $196,200. The Group’sshare of the net tangible assets of UOB Investment Consultancy (Beijing) Limited at the date of acquisition in respect of the 50%acquisition was $196,200.

(c) Liquidation of SubsidiariesDuring the financial year, the following subsidiaries were placed into members’ voluntary liquidation:

Group's Shareof Net Tangible Group'sAssets at Date Effectiveof Liquidation Interest

$'000 %

asia-reach.com Pte Ltd * 100Grand Orient Nominees Pte Ltd 69 100ICB Enterprises (Private) Limited 508 100ICB Finance Limited 10,379 100OUB Australia Ltd 18,400 100OUB Bullion & Futures Ltd 56,874 100OUB Investments Pte Ltd 19,899 100OUB-TA Asset Management Sdn Bhd 1,246 51OUL Sdn Bhd 558 100Overseas Union Developments Sdn Bhd 349 100Overseas Union Garden (Private) Limited (6) 100Overseas Union Holdings Sdn Bhd 225 100Overseas Union Management Services Sdn Bhd 3 100Overseas Union Project Management Pte Ltd * 100Overseas Union Realty Services Pte Ltd 51 100Securities Investments Pte Ltd 144,678 100UOB Management Services Pte Ltd 3 100UOB Property Management Pte Ltd * 100UOB Travel (General Sales Agent) Pte Ltd 319 55

* Amount less than $1,000.



In addition, the following subsidiaries were also placed into members’ voluntary liquidation and liquidation was completedduring the financial year:

Group’s Share Group’s Shareof Net Tangible Group’s of theAssets at Date Effective Liquidationof Liquidation Interest Proceeds

$’000 % $’000

OUB Australia Nominees Pty Ltd 16 100 16OUB (Australia) Securities Pty Ltd 201 100 201OUB Finance (H.K.) Limited 5,743 100 5,743Overseas Union Bank Nominees (U.K.) Limited 1 100 1Overseas Union Facilities (H.K.) Ltd 466 100 466Tye Hua Investments Pte Ltd 942,600 100 942,600

(d) Disposal of a SubsidiaryDuring the financial year, the Group disposed of Overseas Union Facilities Sdn Bhd (“OUFSB”), a wholly-owned subsidiary, for aconsideration of $1,596. The Group’s share of the net assets of OUFSB was nil.

Results for the Financial Year

The Group The Bank$'000 $'000

Profit after tax 1,093,844 1,432,026Minority interests (29,644) –

Net profit attributable to members 1,064,200 1,432,026

Material Transfers to or from Reserves and ProvisionsMaterial movements in reserves and provisions are set out in the notes to the financial statements.

Issue of Shares and Debentures(a) During the financial year, the Bank issued 494,000 ordinary shares of $1 each to option holders who exercised their rights in

connection with the UOB Executives’ Share Option Scheme and the UOB 1999 Share Option Scheme as follows:

Subscription Price Number of Ordinary SharesPer Share, Paid in Cash of $1 Each in the Bank

$

8.25 109,0003.14 39,000

14.70 28,00012.90 318,000

494,000

All newly issued shares rank pari passu in all respects with the previously issued shares.

80

Issue of Shares and Debentures (continued)

(b) Details of issues of shares by subsidiaries during the financial year are set out below.

The following subsidiaries issued shares at par which were fully paid up in cash to provide additional working capital:

Number of Type of Issue Price Par ValueShares Issued Shares Paid in Cash Per Share

Tye Hua Investments Pte Ltd 942,599,998 Ordinary $942,599,998 $1UOB Capital Management Pte Ltd 26,600,000 Ordinary $26,600,000 $1UOB Holdings (USA) Inc. 960,000 Preference US$960,000 US$1

(equivalent to$1,666,464)

UOB Global Capital LLC 960,000 Preference US$960,000 US$1(equivalent to$1,666,464)

Industrial & Commercial Property (S) Pte Ltd 30,000,000 Ordinary $30,000,000 $1UOB Investment Advisor (Taiwan) Ltd 1,300,000 Ordinary TWD13,000,000 TWD10

(equivalent to$648,889)

UOB Radanasin Bank Public Company Limited 149,999,642 Ordinary THB1,499,996,420 THB10(equivalent to$60,364,956)

In addition, UOB Venture Management (Shanghai) Co., Ltd increased its registered share capital by RMB128,696,165(equivalent to $26,989,915).

(c) In addition, during the financial year, Overseas Union Trust Limited (“OUT”) issued the following ordinary shares of $1 each tooption holders who exercised their rights in connection with the OUT Share Option Scheme:

Subscription Price Number of Ordinary SharesPer Share, Paid in Cash of $1 Each in OUT

$

2.52 112,0003.89 29,000

141,000

On 19 December 2002, pursuant to a scheme of arrangement under Section 210 of the Companies Act, Cap. 50, OUT effectedthe following in respect of its ordinary shares:

(i) 32,703,226 shares held by all shareholders (referred to as “Scheme Shareholders” representing the minority interests of47.11%) other than the Bank were cancelled by way of a capital reduction in exchange for a cash consideration of$4.60 per share or a total consideration of $150,434,840 paid by the Bank to the Scheme Shareholders; and

(ii) 32,703,226 new shares equal in number to such cancelled shares held by the Scheme Shareholders were issued andallotted by OUT, credited as fully paid up, to the Bank and its nominees.

As a result, the Bank held 100% of the issued share capital of OUT. OUT was delisted from the Singapore Exchange on20 December 2002.

All newly issued shares rank pari passu in all respects with the previously issued shares.

(d) There was no other issue of shares or debentures by the Bank or any other corporation in the Group during the financial year.



Arrangements to Enable Directors to Acquire Shares or DebenturesNeither at the end of nor at any time during the financial year was the Bank a party to any arrangement whose object was to enablethe directors of the Bank to acquire benefits by means of the acquisition of shares in, or debentures of, the Bank or any other bodycorporate, other than those issued in connection with the UOB Executives’ Share Option Scheme and the UOB 1999 Share OptionScheme as set out in this report.

Directors’ Interests in Shares, Share Options and Debentures(a) The interests of the directors holding office at the end of the financial year in the share capital of the Bank and related

corporations according to the register of directors’ shareholdings were as follows:

Number of Ordinary Shares of $1 EachShareholdings in which

Shareholdings Registered in Directors are Deemed tothe Name of Directors have an Interest

At 31.12.2002 At 1.1.2002 At 31.12.2002 At 1.1.2002

The BankMr Wee Cho Yaw 16,390,248 16,390,248 209,258,142 146,375,326Mr Lee Hee Seng 562,341 562,341 223,303 223,303Mr Wee Ee Cheong 2,794,899 2,794,899 143,985,251 143,985,251Mr Ngiam Tong Dow – – 4,600 4,600Mr Ernest Wong Yuen Weng 50,000 70,000 – –Dr Cham Tao Soon – – 4,520 4,520Mr Tan Kok Quan – – 95,038 95,038Mrs Margaret Lien Wen Hsien 99,783 99,783 81,538,287 81,538,287Mr Ng Boon Yew – – 5,280 5,280

United Overseas Insurance LimitedMr Wee Cho Yaw 25,400 25,400 – –

Overseas Union Securities LimitedMr Lee Hee Seng 796,875 796,875 – –Mrs Margaret Lien Wen Hsien – – 15,625 15,625

Industrial & Commercial Bank LimitedMr Wee Ee Cheong – – – 356,000

Overseas Union Trust LimitedMr Lee Hee Seng – 74,000 – –Mrs Margaret Lien Wen Hsien – 56,600 – 133,900

(b) According to the register of directors’ shareholdings, no director holding office at 31 December 2002 had any interest in theshare options in, or debentures of the Bank and related corporations.

(c) There was no change in any of the above-mentioned interests between the end of the financial year and 21 January 2003(being the 21st day after the end of the financial year).

82


DividendsDividends paid, declared and recommended since the end of the Bank’s previous financial year were as follows:

$’000A final dividend of 25 cents per share net of tax at 22% was paid on 31 May 2002

in respect of the financial year ended 31 December 2001:– as proposed in the directors’ report for that financial year 306,366– in respect of new shares issued upon the exercise of share options before book closure date 88

306,454

An interim dividend of 15 cents per share net of tax at 22% was paid on 4 September 2002in respect of the financial year ended 31 December 2002 183,874

An interim dividend of 18.76 cents per share net of tax at 22% was paid in specie on 20 December 2002in respect of the financial year ended 31 December 2002 [Details of the distribution are set outin Note 19(c) to the financial statements] 230,020

A proposed final dividend of 25 cents per share recommended by the directors, net of tax at 22%,in respect of the financial year ended 31 December 2002 306,463

Bad and Doubtful DebtsBefore the financial statements of the Bank were made out, the directors took reasonable steps to ascertain that proper action hasbeen taken in relation to the writing off of bad debts and providing for doubtful debts of the Bank and have satisfied themselves thatall known bad debts of the Bank have been written off and that where necessary adequate provision has been made for doubtfuldebts.

At the date of this report, the directors are not aware of any circumstances which would render any amounts written off for baddebts or provided for doubtful debts in the consolidated financial statements of the Group inadequate to any substantial extent.

Current AssetsBefore the financial statements of the Bank were made out, the directors took reasonable steps to ascertain that any current assetsof the Bank which were unlikely to realise their book values in the ordinary course of business have been written down to theirestimated realisable values or that adequate provision has been made for the diminution in values of such current assets.

At the date of this report, the directors are not aware of any circumstances, not otherwise dealt with in this report, which wouldrender the values attributed to current assets in the consolidated financial statements of the Group misleading.

Charges on Assets and Contingent LiabilitiesAt the date of this report, no charges have arisen since the end of the financial year on the assets of the Bank or any othercorporation in the Group which secure the liability of any other person, nor has any contingent liability arisen since the end of thefinancial year in the Bank or any other corporation in the Group other than those normally undertaken in the course of the activitiesof the Bank and the Group.


Ability to Meet ObligationsNo contingent or other liability of the Bank or any corporation in the Group has become enforceable or is likely to become enforceablewithin the period of twelve months after the end of the financial year which, in the opinion of the directors, will or may substantiallyaffect the ability of the Bank and of the Group to meet their obligations as and when they fall due.

Other Circumstances Affecting the Financial StatementsAt the date of this report, the directors are not aware of any circumstances not otherwise dealt with in this report or the consolidatedfinancial statements which would render any amount stated in the financial statements of the Bank and the consolidated financialstatements of the Group misleading.

Unusual ItemsIn the opinion of the directors, the results of the operations of the Bank and of the Group during the financial year have not beensubstantially affected by any item, transaction or event of a material and unusual nature other than the effects of the merger of OUBand ICB into the Bank as shown in the notes to the financial statements.

Unusual Items after the Year-End DateIn the opinion of the directors, no item, transaction or event of a material and unusual nature has arisen in the interval between theend of the financial year and the date of this report which would affect substantially the results of the operations of the Bank andof the Group for the financial year in which this report is made.

Directors’ Contractual BenefitsSince the end of the previous financial year, no director has received or become entitled to receive a benefit (other than as disclosedin the consolidated financial statements and in this report) by reason of a contract made by the Bank or a related corporation withthe director or with a firm of which he is a member or with a company in which he has a substantial financial interest.

84


Directors’ Fees and Other Remuneration(a) Details of the total fees and other remuneration paid/payable by the Group to the directors of the Bank for the financial year

ended 31 December 2002 are as follows:

Directors’ Base or Variable/ Benefits-In-KindFees Fixed Salary Performance Bonus and Others Total

% % % % %

$6,500,000 to $6,749,999 3.2 10.7 85.8 0.3 100.0Mr Wee Cho Yaw

$2,000,000 to $2,249,999 7.6 30.5 59.5 2.4 100.0Mr Wee Ee Cheong

$1,750,000 to $1,999,999 4.1 39.5 55.8 0.6 100.0Mr Lee Hee Seng

$1,250,000 to $1,499,999 4.2 45.7 46.5 3.6 100.0Mr Koh Beng Seng

Below $250,000 100.0 – – – 100.0Mr Ho Sim Guan

(retired on 9 May 2002)Mr Ngiam Tong DowMr Ernest Wong Yuen WengMr Wong Meng MengMr John C Dean Jr

(resigned on 17 June 2002)Mr Sim Wong HooMr Philip Yeo Liat KokDr Cham Tao SoonMr Tan Kok QuanProfessor Lim PinMrs Margaret Lien Wen HsienMr Ng Boon Yew

(b) The above directors did not receive any share options during the financial year.


Share Options of the Bank(a) From 1990 to 1998, share options were granted by the Bank pursuant to the UOB Executives’ Share Option Scheme in respect

of unissued ordinary shares of $1 each to officers of the Bank and its subsidiaries who are in the corporate grade ofVice President rank and above and are not substantial shareholders of the Bank. Particulars of the share options granted underthis scheme in 1998 (hereinafter called “Options 1998”) have been set out in the directors’ report for the year ended31 December 1998.

(b) On 6 October 1999, the Bank’s shareholders approved the adoption of the UOB 1999 Share Option Scheme to replace theUOB Executives’ Share Option Scheme. Under the UOB 1999 Share Option Scheme, options may be granted to employees in thecorporate grade of Vice President (or an equivalent rank) and above and selected employees below the corporate grade ofVice President (or an equivalent rank) of the Bank and its subsidiaries, and to directors and controlling shareholders. Particularsof the share options granted under this scheme in 1999 and 2000 (hereinafter called “Options 1999” and “Options 2000”respectively) have been set out in the directors’ reports for the financial years ended 31 December 1999 and 2000 respectively.

(c) During the financial year, no options were granted pursuant to the UOB 1999 Share Option Scheme.

(d) Statutory and other information regarding the options is as follows:

(i) Options Option Period Offer Price$

UOB Executives’ Share Option Scheme1998 14 September 1999 to 13 June 2003 3.14

UOB 1999 Share Option Scheme1999 27 December 2000 to 26 December 2004 14.702000 11 December 2001 to 10 December 2005 12.90

(ii) The share options expire at the end of the respective option periods unless they lapse earlier in the event of death, bankruptcyor cessation of employment of the participant or the take-over or winding up of the Bank. Further details of theUOB Executives’ Share Option Scheme and the UOB 1999 Share Option Scheme (“the Schemes”) are set out in the circularsto shareholders dated 18 January 1990 and 10 September 1999 respectively.

86


Share Options of the Bank (continued)

(d) (iii) Since the commencement of the Schemes, no participant received 5% or more of the total options available under theSchemes and no options were granted to controlling shareholders (or their associates). Since the commencement of theSchemes, no options were granted to directors of the Bank except for Mr Ernest Wong Yuen Weng, who received optionssince the commencement of the Schemes up to 31 December 1999 as follows:

Aggregate Number of Shares underOption since the Commencement of the

UOB Executives’ Share Option SchemeOptions Granted during and the UOB 1999 Share Option Number of Shares underthe Financial Year Scheme up to 31 December 2002 Option Outstanding as at

Granted Exercised Lapsed 31.12.2002 1.1.2002

Nil 741,000 588,000 153,000 – –

Mr Ernest Wong Yuen Weng did not receive any options after 31 December 1999.

(iv) The holders of the Bank’s options have no right to participate, by virtue of the options, in any share issue of any othercompany.

(e) Save as disclosed in this report, no shares of the Bank were issued during the year to which this report relates by virtue of theexercise of options granted pursuant to the Schemes, whether granted before or during the financial year.

(f) Unissued ordinary shares of $1 each under option at 31 December 2002 comprise the following:

Year in which Options Price Per Sharewere Granted Under Payable in Full Upon Date of Expiration Number ofthe Schemes Application of Option Shares

$

1998 3.14 14 June 2003 10,0001999 14.70 27 December 2004 1,211,0002000 12.90 11 December 2005 1,179,000

2,400,000

Share Options of the Bank’s Subsidiary, Overseas Union Trust Limited (“OUT”)(a) The OUT Share Option Scheme (the scheme as amended or modified from time to time hereinafter called the “OUT Scheme”)

was approved by the members of OUT at an Extraordinary General Meeting held on 11 May 1995.

(b) Options under the OUT Scheme were granted to officers of OUT in the corporate grade of Assistant Manager (or an equivalentrank) and above, and an executive director of OUT. Particulars of the share options granted under this scheme have been set outin the directors’ report for the year ended 31 December 2001.

(c) On 1 April 2000, replacement options (hereinafter called the “Replacement Options”) were granted pursuant to theOUT Scheme (as amended) to holders of outstanding options granted under the OUT Scheme and who, on that date, satisfiedthe eligibility criteria specified in Regulation 6 of the Regulations of the OUT Scheme. Particulars of the Replacement Optionsgranted under this scheme have been set out in the directors’ report for the year ended 31 December 2001.


(d) No options have been granted under the OUT Scheme during the period from 20 September 2001, the date when OUT becamea subsidiary of the Bank, to 31 December 2002.

(e) Save as disclosed in this report, no shares of OUT were issued during the year to which this report relates by virtue of the exerciseof options granted pursuant to the OUT Scheme.

(f) Statutory and other information regarding the unissued shares of OUT under options which were granted pursuant to theOUT Scheme as at 31 December 2002 is as follows:

Year in which Options Price Per Share Number ofwere Granted Under Payable in Full Upon Date of Expiration Ordinary Shares ofthe OUT Scheme Application of Option $1 Each in OUT

$

1995 Replacement Options 2.49 1 October 2005 63,0411996 Replacement Options 2.61 2 October 2006 71,0001997 Replacement Options 2.14 30 September 2007 57,0001998 Replacement Options 1.00 4 October 2008 75,0001999 Options 2.27 30 September 2009 87,0002000 Options 2.52 21 September 2010 202,0002001 Options 3.89 5 August 2011 403,000

958,041

The holders of the options, including Replacement Options, of OUT have no right to participate, by virtue of the options, in anyshare issue of any other company.

(g) Pursuant to the proposal made in connection with the privatisation of OUT dated 21 October 2002 to, and accepted by, each ofthe holders of the options granted under the OUT Scheme (“the Optionholders”), each of the Optionholders has agreed not toexercise all or any of his rights as holders of such options. Pursuant to Regulation 14.2 of the Scheme, all the options grantedunder the OUT Scheme lapsed and became null and void on 27 January 2003.

88

Audit CommitteeThe Audit Committee comprises four members, all of whom are non-executive independent directors. The members of the AuditCommittee are as follows:

Mr Ernest Wong Yuen Weng (Chairman)Mr Philip Yeo Liat KokDr Cham Tao SoonMr Tan Kok Quan

In its report to the Board of Directors, the Audit Committee reports that it has reviewed with the Bank’s internal auditors their auditplan and the scope and results of the Bank’s internal audit procedures. The Audit Committee has also reviewed with the Bank’sauditors, PricewaterhouseCoopers, their audit plan, their evaluation of the system of internal accounting controls, their auditors’long-form report and the response of management thereto as well as their audit report on the financial statements of the Bank andthe consolidated financial statements of the Group for the year ended 31 December 2002. The financial statements of the Bank andthe consolidated financial statements of the Group for the year ended 31 December 2002 have been reviewed by the Committeeprior to their submission to the Board of Directors.

The Audit Committee has reviewed the Bank’s position with regard to interested person transactions and the assistance given by theBank’s officers to PricewaterhouseCoopers.

The Audit Committee has also carried out the functions required of the Committee under the Code of Corporate Governance.

At the date of this report, the Audit Committee is reviewing the nomination of a firm of certified public accountants for appointmentas auditors of the Bank by shareholders at the forthcoming Annual General Meeting.

On behalf of the directors

Wee Cho Yaw Wee Ee CheongChairman Deputy Chairman

28 February 2003



In the opinion of the directors, the financial statements set out on pages 91 to 168 are drawn up so as to give a true and fair view ofthe state of affairs of the Bank and of the Group at 31 December 2002, the results of the business and changes in equity of the Bankand of the Group and the cash flows of the Group for the financial year then ended, and at the date of this statement, there arereasonable grounds to believe that the Bank will be able to pay its debts as and when they fall due.

On behalf of the directors

Wee Cho Yaw Wee Ee CheongChairman Deputy Chairman

28 February 2003

Statement by Directorsfor the financial year ended 31 December 2002

90

We have audited the financial statements of United Overseas Bank Limited and the consolidated financial statements of the Groupfor the financial year ended 31 December 2002 set out on pages 91 to 168. These financial statements are the responsibility of theBank’s directors. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and performour audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includesassessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financialstatement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion,

(a) the accompanying financial statements of the Bank and consolidated financial statements of the Group are properly drawn upin accordance with the provisions of the Singapore Companies Act (“Act”) and Singapore Statements of Accounting Standardand so as to give a true and fair view of:

(i) the state of affairs of the Bank and of the Group at 31 December 2002, and the profit and changes in equity of the Bankand of the Group, and the cash flows of the Group for the financial year ended on that date; and

(ii) the other matters required by Section 201 of the Act to be dealt with in the financial statements of the Bank and theconsolidated financial statements of the Group; and

(b) the accounting and other records, and the registers required by the Act to be kept by the Bank and by those subsidiariesincorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

We have considered the financial statements and auditors’ reports of all subsidiaries of which we have not acted as auditors, beingfinancial statements included in the consolidated financial statements. The names of these subsidiaries are stated in Note 46 to thefinancial statements.

We are satisfied that the financial statements of the subsidiaries that have been consolidated with the financial statements of theBank are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statementsand we have received satisfactory information and explanations as required by us for those purposes.

The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification which is material in relationto the consolidated financial statements, and in respect of subsidiaries incorporated in Singapore did not include any commentmade under Section 207(3) of the Act.

PricewaterhouseCoopersCertified Public Accountants

Singapore, 28 February 2003

Auditors’ Report to the Members of United Overseas Bank Limitedfor the financial year ended 31 December 2002


The Group The BankNote 2002 2001 2002 2001

$'000 $'000 $'000 $'000

Interest income 3 3,752,479 3,413,284 2,952,152 2,315,784Less: Interest expense 4 1,583,358 1,984,133 1,233,023 1,472,743

Net interest income 2,169,121 1,429,151 1,719,129 843,041Dividend income 5 31,881 33,701 256,386 231,157Fee and commission income 6 500,545 355,201 293,684 164,003Rental income 7 78,426 75,947 45,667 42,036Other operating income 8 299,272 330,091 263,891 245,296

Income before operating expenses 3,079,245 2,224,091 2,578,757 1,525,533

Less:Staff costs 9 536,354 442,657 336,174 215,706Other operating expenses 10 537,623 431,186 418,399 259,072

1,073,977 873,843 754,573 474,778

Operating profit before goodwillamortisation and provisions 2,005,268 1,350,248 1,824,184 1,050,755

Less: Goodwill amortisation 35 195,554 47,806 191,223 –Less: Provisions 12 451,482 164,795 511,227 111,675

Operating profit after goodwillamortisation and provisions 1,358,232 1,137,647 1,121,734 939,080

Exceptional items 13 (48,065) (11,997) 727,559 (11,045)Share of profit of associates 123,403 71,912 – –

Profit from ordinary activitiesbefore tax 1,433,570 1,197,562 1,849,293 928,035

Less: Tax 14 339,726 268,988 417,267 181,396

Profit after tax 1,093,844 928,574 1,432,026 746,639Minority interests (29,644) (3,995) – –

Net profit for the financialyear attributable to members 1,064,200 924,579 1,432,026 746,639

Earnings per share: 15Basic 68 cents 77 centsDiluted 68 cents 77 cents

The accompanying notes form an integral part of these financial statements. The Auditors’ Report is on page 90.

Income Statementsfor the financial year ended 31 December 2002

92


$'000 $'000 $'000 $'000

Share Capital And ReservesShare capital 16 1,571,603 1,571,109 1,571,603 1,571,109

Share premium 17 791,233 786,192 791,233 786,192

Non-distributable reserves 18 6,223,204 6,622,841 5,801,717 6,076,234

Revenue reserves 19 3,933,004 3,199,343 3,119,545 2,148,951

Share of reserves of associates 20 133,594 537,354 – –

12,652,638 12,716,839 11,284,098 10,582,486

Minority Interests 149,635 398,560 – –

LiabilitiesCurrent, fixed, savings accounts and other

deposits of non-bank customers 67,918,581 74,451,684 57,931,265 36,484,724

Deposits and balances of banks and agents 19,302,058 18,093,807 17,966,942 11,429,360

Deposits from subsidiaries – – 1,421,386 1,133,793

21 87,220,639 92,545,491 77,319,593 49,047,877

Bills and drafts payable 163,865 125,177 107,986 32,221

Provision for current tax 445,997 475,435 371,025 310,255

Other liabilities 22 4,662,937 3,445,900 2,842,129 1,380,453

Deferred tax liabilities 14 26,900 23,539 6,422 874

Debts issued 23 2,146,810 4,157,153 1,294,399 3,639,095

94,667,148 100,772,695 81,941,554 54,410,775

107,469,421 113,888,094 93,225,652 64,993,261

Off-Balance Sheet ItemsContingent liabilities 38 8,918,971 7,788,183 7,802,255 3,535,260

Derivative financial instruments 39 131,279,403 82,208,382 129,039,215 70,380,618

Commitments 40 36,526,489 34,692,168 30,392,941 15,389,598

Balance Sheetsas at 31 December 2002



$'000 $'000 $'000 $'000

AssetsCash and balances with central banks 4,213,458 3,329,827 2,402,190 926,101

Singapore Government treasurybills and securities 24 8,260,989 8,711,833 8,002,833 4,272,411

Other government treasury billsand securities 25 1,332,948 1,817,360 419,031 244,261

Dealing securities 26 620,109 680,989 431,811 358,104

Placements and balanceswith banks and agents 27 19,426,221 24,745,590 18,419,738 19,396,877

Trade bills 28 1,051,030 1,204,164 139,405 62,280

Advances to customers 28 57,832,977 59,687,930 49,816,830 23,433,561

Placements with and advances tosubsidiaries – – 1,018,173 2,038,867

Other assets 29 4,012,147 2,967,633 3,064,785 1,648,779

96,749,879 103,145,326 83,714,796 52,381,241

Investment securities 30 3,945,383 3,431,062 2,687,019 989,656

Investments in associates 31 1,274,245 1,781,322 706,868 737,601

Investments in subsidiaries 32 – – 1,409,829 10,260,598

Fixed assets 34 1,794,349 1,724,515 1,118,922 610,132

Deferred tax assets 14 39,519 29,218 2,790 14,033

Goodwill 35 3,666,046 3,776,651 3,585,428 –

107,469,421 113,888,094 93,225,652 64,993,261


94

The Group

2002Non- Share of

Share Share Distributable Revenue Reserves ofNote Capital Premium Reserves Reserves Associates Total

$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 January 2002As previously reported 1,571,109 786,192 6,622,841 3,136,210 537,354 12,653,706Prior year adjustments

resulting from adoptionof revised SAS 12 19 – – – 63,133 – 63,133

As restated 1,571,109 786,192 6,622,841 3,199,343 537,354 12,716,839Net profit for the financial year

attributable to members – – – 1,064,200 – 1,064,200Differences arising from

currency translation offinancial statements of foreignbranches and subsidiaries 18 – – (14,514) – – (14,514)

Group’s share of reserves ofassociates 20 – – – – (393,977) (393,977)

Other adjustments 18,19 – – (2,968) (2,129) – (5,097)

Total recognised gains/(losses)for the financial year – – (17,482) 1,062,071 (393,977) 650,612

Net transfer to revenue reserves 18,19 – – (384,707) 384,707 – –Transfer from share of

reserves of associates 18,19,20 – – 2,552 7,231 (9,783) –Dividends 19 – – – (720,348) – (720,348)Issue of shares to option holders

who exercised their rights 16,17 494 5,041 – – – 5,535

Balance at 31 December 2002 1,571,603 791,233 6,223,204 3,933,004 133,594 12,652,638

Consolidated Statement of Changes in Equityfor the financial year ended 31 December 2002



The Group

2001Non- Share of

Share Share Distributable Revenue Reserves ofNote Capital Premium Reserves Reserves Associates Total

$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 January 2001As previously reported 1,052,451 783,488 1,820,477 2,792,288 519,469 6,968,173Prior year adjustments

resulting from adoptionof revised SAS 12 19 – – – 63,133 – 63,133

As restated 1,052,451 783,488 1,820,477 2,855,421 519,469 7,031,306Net profit for the financial year

attributable to members – – – 924,579 – 924,579Differences arising from currency

translation of financial statementsof foreign branches and subsidiaries 18 – – 92,741 – – 92,741

Group’s share of reserves ofassociates 20 – – – – 17,885 17,885

Total recognised gains/(losses)for the financial year – – 92,741 924,579 17,885 1,035,205

Net transfer from revenue reserves 18,19 – – 220,148 (220,148) – –Transfer from revenue reserves

due to bonus shares issuedby subsidiary 18,19 – – 57,796 (57,796) – –

Goodwill, previously eliminatedagainst reserves on acquisition,reinstated on disposal of subsidiary 19 – – – 15,231 – 15,231

Dividends 19 – – – (317,944) – (317,944)Issue of shares to option holders

who exercised their rights 16,17 377 2,704 – – – 3,081Issue of shares as part

consideration for theacquisition ofOverseas UnionBank Limited (“OUB”) 16,18 518,281 – 4,431,679 – – 4,949,960

Balance at 31 December 2001 1,571,109 786,192 6,622,841 3,199,343 537,354 12,716,839

Analyses of the movements in each component within ‘Share Capital’, ‘Share Premium’, ‘Non-Distributable Reserves’, ‘RevenueReserves’ and ‘Share of Reserves of Associates’ are presented in Notes 16, 17, 18, 19 and 20 respectively.

96

The Bank

2002Non-

Share Share Distributable RevenueNote Capital Premium Reserves Reserves Total

$’000 $’000 $’000 $’000 $’000

Balance at 1 January 2002As previously reported 1,571,109 786,192 6,076,234 2,106,241 10,539,776Prior year adjustments resulting from

adoption of revised SAS 12 19 – – – 42,710 42,710

As restated 1,571,109 786,192 6,076,234 2,148,951 10,582,486Net profit for the financial year

attributable to members – – – 1,432,026 1,432,026Differences arising from currency

translation of financial statementsof foreign branches 18 – – (15,601) – (15,601)

Total recognised gains/(losses)for the financial year – – (15,601) 1,432,026 1,416,425

Transfer to statutory reserves 18,19 – – 741,193 (741,193) –Transfer from capital reserves 18,19 – – (1,000,109) 1,000,109 –Dividends 19 – – – (720,348) (720,348)Issue of shares to option holders

who exercised their rights 16,17 494 5,041 – – 5,535

Balance at 31 December 2002 1,571,603 791,233 5,801,717 3,119,545 11,284,098

Statement of Changes in Equityfor the financial year ended 31 December 2002


The Bank

2001Non-

Share Share Distributable RevenueNote Capital Premium Reserves Reserves Total

$’000 $’000 $’000 $’000 $’000

Balance at 1 January 2001As previously reported 1,052,451 783,488 1,460,184 1,864,546 5,160,669Prior year adjustments resulting from

adoption of revised SAS 12 19 – – – 42,710 42,710

As restated 1,052,451 783,488 1,460,184 1,907,256 5,203,379Net profit for the financial year

attributable to members – – – 746,639 746,639Differences arising from currency

translation of financial statementsof foreign branches 18 – – (2,629) – (2,629)

Total recognised gains/(losses)for the financial year – – (2,629) 746,639 744,010

Transfer to statutory reserves 18,19 – – 187,000 (187,000) –Dividends 19 – – – (317,944) (317,944)Issue of shares to option holders

who exercised their rights 16,17 377 2,704 – – 3,081Issue of shares as part consideration

for the acquisition of OUB 16,18 518,281 – 4,431,679 – 4,949,960

Balance at 31 December 2001 1,571,109 786,192 6,076,234 2,148,951 10,582,486

Analyses of the movements in each component within ‘Share Capital’, ‘Share Premium’, ‘Non-Distributable Reserves’ and ‘RevenueReserves’ are presented in Notes 16, 17, 18 and 19 respectively.


98

2002 2001$’000 $’000

Cash Flows From Operating ActivitiesProfit before tax 1,433,570 1,197,562

Adjustments for:Depreciation of fixed assets 114,536 96,119Goodwill amortisation 195,554 47,806Share of profit of associates (123,403) (71,912)

Operating profit before changes in operating assets and liabilities 1,620,257 1,269,575

Changes in operating assets and liabilities:Deposits (5,324,852) (1,165,418)Bills and drafts payable 38,688 (48,023)Other liabilities 1,216,704 (567,466)Dealing securities 60,880 179,039Placements and balances with banks and agents 5,319,369 (1,136,568)Trade bills and advances to customers 2,008,087 (824,386)Other government treasury bills and securities not qualifying

as cash and cash equivalents 406,917 310,371Other assets (1,043,677) 124,578

Cash generated from/(used in) operations 4,302,373 (1,858,298)

Income taxes paid (371,089) (322,008)

Net cash from/(used in) operating activities 3,931,284 (2,180,306)

Cash Flows From Investing ActivitiesIncrease in investment securities and investments in associates (339,781) (1,172,959)Net dividends received from associates 52,210 39,246Net (increase)/decrease in fixed assets (184,031) 21,593Acquisition of/change in minority interests of subsidiaries (353,136) 42,649Net cash flow on acquisition (1,204) 6,405,853Net cash flow from disposal of subsidiaries 2 28,933

Net cash (used in)/from investing activities (825,940) 5,365,315

Cash Flows From Financing ActivitiesProceeds from issue of shares 5,535 3,081Net (decrease)/increase in debts issued (2,010,343) 4,157,153Dividends paid by the Bank (720,348) (317,944)Dividends paid by subsidiaries to minority shareholders (10,382) (6,811)

Net cash (used in)/from financing activities (2,735,538) 3,835,479

Currency translation adjustment (14,514) 92,741

Net increase in cash and cash equivalents 355,292 7,113,229Cash and cash equivalents at beginning of the financial year 12,728,768 5,615,539

Cash and cash equivalents at end of the financial year (Note 41) 13,084,060 12,728,768

Consolidated Cash Flow Statementfor the financial year ended 31 December 2002



These notes form an integral part of and should be read in conjunction with the accompanying financial statements.

1 GeneralThe Bank is incorporated and domiciled in Singapore and is listed on the Singapore Exchange. The address of its registered officeis as follows:

80 Raffles PlaceUOB PlazaSingapore 048624

The Bank is principally engaged in the business of banking in all its aspects, including the operation of an Asian Currency Unitunder the terms and conditions specified by the Monetary Authority of Singapore. The principal activities of its subsidiaries areset out in Note 46 to the financial statements.

2 Significant Accounting Policies(a) Basis of Accounting

The financial statements are prepared in accordance with and comply with Singapore Statements of Accounting Standard(“SAS”). The financial statements are prepared in accordance with the historical cost convention, modified by the revaluation ofcertain derivative financial instruments to market value at the balance sheet date and the inclusion of certain freehold andleasehold land and buildings at valuation.

The financial statements of the Bank and the consolidated financial statements of the Group are expressed in Singapore dollars.

(b) Basis of Consolidation(i) The consolidated financial statements include the financial statements of the Bank and all its subsidiaries made up to the

end of the financial year. The results of subsidiaries acquired or disposed of during the financial year are included in orexcluded from the consolidated income statement from the respective dates of their acquisition or disposal. Inter-companybalances and transactions and resulting unrealised profits and losses are eliminated in full on consolidation.

(ii) Interpretation of Statement of Accounting Standard ("INT") 5: Consolidation – Special Purpose Entities ("SPE") requiresthat SPEs be consolidated when the substance of the relationship between the Group and the SPE indicates that the SPE iscontrolled by the Group. The implementation of INT 5 has resulted in the consolidation of an SPE established in the ordinarycourse of the Group’s business. Details of the SPE are set out in Note 36.

The accounting policy was adopted on 1 January 2002 to comply with INT 5 and has been accounted for retrospectively.The comparatives of the Group have been restated to conform to the new policy.

Notes to the Financial Statementsfor the financial year ended 31 December 2002

100

2 Significant Accounting Policies(b) Basis of Consolidation (continued)

(ii) The adjustments made to the comparative figures are to increase the assets and liabilities and to decrease the derivativefinancial instruments by the amounts shown below:

The GroupIncrease/(Decrease)

$’000

Balance SheetAssetsPlacements and balances with banks and agents 58,250Investment securities 473,937Other assets 16,359

548,546

LiabilitiesDebts issued 518,058Other liabilities 30,488

548,546

Off-Balance Sheet ItemsDerivative financial instruments (contract or underlying principal amount) (552,836)

The adoption of the accounting policy has no effect on the results of the Group for the financial year ended31 December 2001.

(c) AssociatesThe Group treats as associates those companies in which the Group has a long-term equity interest of 20 to 50 percent and overwhose financial and operating policy decisions it has significant influence except when the investment is acquired and heldexclusively with a view to its subsequent disposal in the near future, in which case it is accounted for either as dealing securitiesor investment securities as appropriate.

Associates are accounted for under the equity method whereby the Group’s share of profits less losses of associates is includedin the consolidated income statement and the Group’s share of post-acquisition reserves, net of dividends received, are adjustedagainst the cost of investments to arrive at the carrying amount in the consolidated balance sheet.

(d) Trade Bills and Advances to CustomersTrade bills and advances to customers are stated at cost less provisions for possible losses. These provisions comprise specificprovisions made for any debts considered to be doubtful of collection and a general provision maintained to cover losses which,although not specifically identified, are inherent in any portfolio of loans and advances. Known bad debts are written off.



(e) Investments(i) Singapore Government treasury bills and securities, other than those that are held as long-term investments, are stated at

the lower of cost and market value determined on an aggregate basis. Long-term Singapore Government securities arestated at cost and provisions are made for diminution in value that is other than temporary, determined on an individualcounter basis.

(ii) Other government treasury bills and securities are stated at the lower of cost and market value determined on an aggregatebasis.

(iii) Dealing securities are stated at the lower of cost and market value determined on an aggregate basis.

(iv) Investment securities, other than those held by the consolidated special purpose entity (“SPE”), and investments in subsidiariesand associates are stated at cost and provisions are made for diminution in value that is other than temporary, determinedon an individual counter basis.

Investment securities held by the consolidated SPE are stated at fair value. Fair value for publicly quoted investments is basedon quoted market prices at the balance sheet date. Fair value for unquoted investments is based on other techniques, suchas estimated cash flows.

(f) Cash and Cash EquivalentsFor the purposes of the consolidated cash flow statement, cash and cash equivalents comprise the balance sheet amounts ofcash and balances with central banks and government treasury bills and securities, less non-cash equivalents included in thoseamounts.

(g) Revenue Recognition(i) Interest income is accrued on a day-to-day basis.

(ii) Dividend income from investments other than investments in subsidiaries is taken up gross in the income statements of theaccounting period in which the dividend is received.

(iii) Dividend income from subsidiaries is taken up gross in the income statements of the accounting period in which thedividend is declared.

(iv) Profits and losses on disposal of investments are taken up in the income statements.

(v) Fee and commission income and rental income are recognised on an accrual basis.

(h) Fixed Assets and DepreciationFixed assets are stated at cost, or valuation for certain land and buildings, less accumulated depreciation. Fixed assets, other thanland and buildings, are depreciated on a straight-line basis over 5 or 10 years. Freehold land and leasehold land exceeding99 years tenure are not depreciated. Other leasehold land is depreciated on a straight-line basis over the period of the lease.Buildings are depreciated on a straight-line basis over 50 years or over the period of the respective leases, whichever is shorter.

102

2 Significant Accounting Policies (continued)

(i) TaxDeferred income tax is determined on the basis of tax effect accounting using the liability method. Deferred income tax isprovided in full on significant temporary differences arising between the tax bases of assets and liabilities and their carryingamounts in the financial statements. Tax rates enacted or substantively enacted by the balance sheet date are used to determinedeferred income tax.

Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which thetemporary differences can be utilised.

Deferred income tax is provided on significant temporary differences arising on investments in subsidiaries and associates,except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporarydifference will not reverse in the foreseeable future.

Prior to 1 January 2002, deferred tax was provided on significant timing differences arising from the different treatments inaccounting and taxation of relevant items except where it can be demonstrated with reasonable probability that the tax deferralwould continue for the foreseeable future. In accounting for timing differences, deferred tax assets were not accounted forunless there was reasonable expectation of their realisation.

The new accounting policy has been adopted to comply with the revised Statement of Accounting Standard (“SAS”) 12 (2001)Income Taxes and has been applied retrospectively. The comparatives have been restated to conform to the changed policy.

The adjustments made to the comparative figures are as follows:

The Group The Bank$’000 $’000

Increase in deferred tax assets 29,218 14,033Decrease in deferred tax liabilities 33,915 28,677

Increase in retained profits 63,133 42,710

(j) Foreign CurrenciesForeign currency assets and liabilities are translated to Singapore dollars at the rates of exchange ruling at the balance sheetdate. Foreign currency transactions during the year are converted to Singapore dollars at the rates of exchange ruling on thetransaction dates. All exchange differences are taken up in the income statements.

For the purpose of the consolidation of foreign subsidiaries and branches and the equity accounting for associates, the balancesheets and results are translated into Singapore dollars at the exchange rates prevailing at the balance sheet date. All exchangeadjustments arising on translation into Singapore dollars are taken directly to the foreign currency translation reserve.



(k) Derivative Financial InstrumentsDerivative financial instruments are initially recognised in the balance sheets at amounts paid or received, as appropriate.

Those undertaken for trading purposes are subsequently remeasured to fair value and the resultant profits and losses are takenup in the income statements.

Those entered into for hedging purposes are subsequently accounted for in a manner consistent with the accounting treatmentof the hedged items.

(l) GoodwillGoodwill represents the excess of the fair value of the consideration given over the fair value of the identifiable net assets ofsubsidiaries, associates or businesses acquired.

Goodwill arising on acquisition of subsidiaries occurring on or after 1 January 2001 is reported in the balance sheet as anintangible asset. Goodwill on acquisition of associates occurring on or after 1 January 2001 is included in investments inassociates.

Goodwill is amortised on a straight-line basis, through the income statement, over its useful economic life up to a maximum of20 years. Goodwill which is assessed as having no continuing economic value is written off to the income statement.

Negative goodwill represents the excess of the fair value of the identifiable net assets of subsidiaries or businesses acquired overthe fair value of the consideration given. Negative goodwill is amortised on a straight-line basis, through the income statementover the remaining weighted average useful life of the identifiable depreciable/amortisable assets acquired, with the exceptionof the amount of negative goodwill exceeding the fair values of acquired identifiable non-monetary assets which is recognisedas income immediately.

(m) ProvisionsProvisions are recognised when the Group or the Bank has a present legal or constructive obligation as a result of past events, itis probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can bemade.

(n) Employee BenefitsEquity Compensation BenefitsEmployees of the Group and the Bank with the corporate grade of Vice President (or equivalent position) and above as well asselected employees below Vice President qualify for the UOB Executives’ Share Option Scheme and the UOB 1999 Share OptionScheme, subject to certain restrictions.

Pursuant to these Schemes, options have been awarded to enable the holders to acquire shares in the Bank at the exercise price.

The Group and the Bank do not recognise share options issued under these Schemes as a charge to the income statements.

Post Employment BenefitsThe Group contributes to legally required social security schemes and these schemes are considered defined contribution schemes.

These expenses are charged to the income statements as and when they arise and are included as part of staff costs.

(o) DividendsDividends on ordinary shares are recognised in equity in the period in which they are declared.

104

2 Significant Accounting Policies (continued)

(p) Repurchase and Reverse Repurchase AgreementsRepurchase agreements are treated as collateralised borrowings and the amounts borrowed are shown as liabilities, included indeposits and balances of banks and agents (Note 21). The securities sold under repurchase agreements are treated as pledgedassets and remain on the balance sheets as assets, included in Singapore Government treasury bills and securities (Note 24) andother government treasury bills and securities (Note 25).

Reverse repurchase agreements are treated as collateralised lending and the amounts lent are shown as assets, included inplacements and balances with banks and agents (Note 27).

The difference between the amount received and the amount paid under repurchase agreements and reverse repurchaseagreements is amortised as interest expense and interest income respectively.

(q) ComparativesWhere necessary, comparative figures have been adjusted to conform with changes in the current presentation. Where applicable,the comparatives have been adjusted or extended to take into account the requirements of the revised SAS 12 and INT 5 whichthe Group and the Bank adopted in 2002.

3 Interest Income

The Group The Bank2002 2001 2002 2001$'000 $'000 $'000 $'000

Government treasury bills and securities 239,966 194,894 192,661 104,213Trade bills and advances to customers 2,810,875 2,183,795 2,164,769 1,296,157Placements and balances with banks and agents 545,722 951,806 481,673 869,439Dealing and investment securities 155,916 82,789 113,049 45,975

3,752,479 3,413,284 2,952,152 2,315,784

Received/receivable from:Subsidiaries – – 28,724 45,141Associates 11,718 21,129 11,678 20,811Third parties 3,740,761 3,392,155 2,911,750 2,249,832

3,752,479 3,413,284 2,952,152 2,315,784



4 Interest Expense

The Group The Bank2002 2001 2002 2001

$'000 $'000 $'000 $'000

Non-bank deposits 1,066,224 1,318,879 752,219 874,637Deposits and balances of banks and agents 396,122 611,922 372,792 547,774Debts issued 121,012 53,332 108,012 50,332

1,583,358 1,984,133 1,233,023 1,472,743

Paid/payable to:Subsidiaries – – 30,073 64,553Associates 1,005 1,605 817 1,245Third parties 1,582,353 1,982,528 1,202,133 1,406,945

1,583,358 1,984,133 1,233,023 1,472,743

5 Dividend Income


$'000 $'000 $'000 $'000

Dividend income from:Investments in subsidiaries

Quoted – – 8,257 33,593Unquoted – – 168,189 151,989

Investments in associatesQuoted – – 37,265 38,434Unquoted – – 20,628 1,606

Other investmentsQuoted 19,336 28,910 10,857 3,458Unquoted 12,545 4,791 11,190 2,077

31,881 33,701 256,386 231,157

6 Fee and Commission Income


$'000 $'000 $'000 $'000

Credit card 95,948 63,708 74,352 45,085Fund management 74,476 52,879 5,723 –Futures broking and stockbroking 48,802 32,839 – –Investment-related 29,035 13,851 27,729 9,696Loan-related 86,187 60,937 61,042 33,132Service charges 44,193 35,243 36,393 24,936Trade-related 100,910 80,272 71,801 45,604Others 20,994 15,472 16,644 5,550

500,545 355,201 293,684 164,003

106

7 Rental IncomeRental income represents income from the tenanted areas of the buildings owned by the Bank and its subsidiaries.

8 Other Operating Income


Net profit on dealing securities,government treasury bills and securities,and derivatives 57,544 79,956 21,524 52,178

Net profit on foreign exchange dealings 82,250 137,095 67,009 106,990Net profit on disposal of investment securities

and associates 78,342 16,098 106,867 8,935Net profit on disposal of fixed assets 11,512 39,992 10,145 33,461Net profit/(loss) on disposal and

liquidation of subsidiaries 2 (6,546) 1,236 (11,712)Other income 69,622 63,496 57,110 55,444

299,272 330,091 263,891 245,296

Net profit on disposal of investment securities and associates includes mainly the profit arising from the divestment of anassociate, Haw Par Corporation Limited, through distribution in specie of shares to shareholders.

9 Staff Costs(a)


Wages and salaries 449,935 370,115 280,996 178,355Employer’s contributions to Central Provident Fund 52,174 41,199 32,455 21,574Other staff-related costs 34,245 31,343 22,723 15,777

536,354 442,657 336,174 215,706

(b)


Number of employees at the balance sheet date 10,320 12,142 4,974 3,125



(c) Equity Compensation BenefitsOptions to subscribe for ordinary shares of $1 each in the Bank are granted pursuant to the UOB Executives’ Share OptionScheme and the UOB 1999 Share Option Scheme to employees of the UOB Group with the corporate grade of Vice President (oran equivalent position) and above as well as selected employees below Vice President, subject to certain restrictions.

Movements in the number of shares under the options held by employees of the Group are as follows:

2002 2001’000 ’000

Outstanding at 1 January 3,077 3,807Exercised (494) (377)Lapsed (183) (353)

Outstanding at 31 December 2,400 3,077

Details of the unissued ordinary shares of $1 each of the Bank under option at the end of the financial year are set out below:

Price Per ShareYear in which Options were Payable in Full Date of ExpirationGranted Under the Schemes Upon Application of Option Number of Shares

2002 2001‘000 ‘000

1997 8.25 5 February 2002 – 1151998 3.14 14 June 2003 10 501999 14.70 27 December 2004 1,211 1,3842000 12.90 11 December 2005 1,179 1,528

2,400 3,077

Details of share options exercised during the year to subscribe for ordinary shares of $1 each in the Bank are as follows:

Year in which Options were ConsiderationGranted Under the Schemes Exercise Price Number of Shares Issued Received in Cash

2002 2001 2002 2001‘000 ‘000 $‘000 $‘000

1996 9.17 – 212 – 1,9441997 8.25 109 121 899 9981998 3.14 39 44 122 1391999 14.70 28 – 412 –2000 12.90 318 – 4,102 –

494 377 5,535 3,081

108

10 Other Operating Expenses


Depreciation of fixed assets 114,536 96,119 80,608 47,053Rental of premises and equipment 50,059 43,607 55,785 35,115Maintenance of premises and other assets 46,472 34,884 33,263 17,235Other expenses of premises 32,506 31,607 18,755 14,441Fees paid/payable to PricewaterhouseCoopers Singapore:

Audit feesCurrent year 1,614 2,226 836 668Prior year (over)/underprovision (244) 255 (5) 193

1,370 2,481 831 861

Other fees* 704 773 208 660Less: Amount capitalised in cost of acquisition of OUB – 500 – 500

Amount charged to the results for the financial year 704 273 208 160Audit fees paid/payable to other auditors including

other member firms of the worldwidePricewaterhouseCoopers organisation 900 1,245 312 210

Other expenses 291,076 220,970 228,637 143,997

537,623 431,186 418,399 259,072

* Include fees in respect of audit-related work required by laws and regulations.



11 Directors’ Fees and Other Remuneration(a) Included in total expenses are fees and other remuneration paid/payable to the directors of the Bank and its subsidiaries as

follows:


$'000 $'000 $'000 $'000

Directors of the Bank:Fees 1,147 887 659 410Remuneration 11,534 10,699 11,534 8,789Professional fees paid/payable to firms of which

certain directors of the Bank are members 201 1,476 17 1,294Less:Amount capitalised in cost of acquisition of OUB – 1,237 – 1,237

Amount charged to the results for the financial year 201 239 17 57

12,882 11,825 12,210 9,256

Directors of subsidiaries:Fees 648 634 10 21Remuneration 5,879 8,082 – –Professional fees paid/payable to firms of which

certain directors of subsidiaries are members 88 424 5 3Less:Amount capitalised in fixed assets 83 419 – –

Amount charged to the results for the financial year 5 5 5 3

6,532 8,721 15 24

(b) The number of directors of the Bank whose total directors’ fees and other remuneration from the Group falls into the followingbands is as follows:

2002 2001

$500,000 and above 4 4$250,000 to $499,999 – –Below $250,000 12 12

16 16

110

12 ProvisionsProvisions charged/(credited) to the income statements during the financial year are as follows:


Specific provisions for and net write-offs oftrade bills and advances to customers 421,753 165,411 308,408 113,295

General provisions, comprising provisions forpossible loan losses, contingencies and otherbanking risks – (70,173) 16,126 (59,763)

Provisions/(write-back of provisions) fordiminution in value of:

Investments in subsidiaries – – 156,907 (13,035)Other investments, fixed assets and other assets 20,929 62,757 29,786 31,178

Provision for life funds 8,800 6,800 – 40,000

451,482 164,795 511,227 111,675

13 Exceptional Items


Gross dividend from Industrial & CommercialBank Limited (“ICB”) arising fromits merger with the Bank, net of dividend paid outof pre-acquisition reserves which was credited tothe Bank’s cost of investment in ICB [Note 32(c)] – – 674,895 –

Deficit arising from the merger of ICB [Note 32(c)] – – (57,422) –Surplus arising from the merger of OUB [Note 32(b)] – – 145,482 –Restructuring costs as a result of the acquisition

of OUB (48,065) (11,997) (35,396) (11,045)

(48,065) (11,997) 727,559 (11,045)



14 Tax(a) The tax charge to the income statements comprises the following:


$'000 $'000 $'000 $'000

On the profit of the financial year:Current tax 317,872 251,651 279,825 190,653Tax on exceptional item [Note 32(c)] – – 148,477 –Deferred tax (8,135) 2,042 (5,404) 52

309,737 253,693 422,898 190,705Share of tax of associates 25,479 25,725 – –

335,216 279,418 422,898 190,705Under/(over)provision of tax in respect of

prior financial years:Current tax 4,680 (10,430) (5,209) (9,309)Deferred tax (170) – (422) –

339,726 268,988 417,267 181,396

The tax charge on the results of the Group and the Bank for the financial year differs from the theoretical amount that wouldarise by applying the Singapore statutory income tax rate to profit before tax due to the following:


$'000 $'000 $'000 $'000

Profit before tax 1,433,570 1,197,562 1,849,293 928,035

Tax calculated at a tax rate of 22% (2001: 24.5%) 315,385 293,403 406,844 227,369Singapore statutory stepped income exemption (360) (338) (12) (13)Offshore income from the Asian Currency Unit and

other income taxed at concessionary rates (39,851) (34,509) (36,269) (28,107)One-off corporate tax rebate of 5% on Singapore

income tax payable for year of assessment 2002 – (8,191) – (6,734)Other tax rebates (1,144) (604) (662) (240)Effect of different tax rates in other countries 31,868 23,238 13,277 17,192Losses of subsidiaries and associates not offset

against taxable income of other entities 18,287 25,866 – –Income not subject to tax (50,860) (21,959) (62,589) (20,006)Expenses not deductible for tax purposes 62,217 3,761 102,309 1,343Realisation of deferred tax benefit in respect of

tax losses not previously recognised (326) (1,249) – (99)

Tax expense on profit of the financial year 335,216 279,418 422,898 190,705

In 2002, the Singapore Government enacted a change in the income tax rate from 24.5% to 22%.

112

14 Tax (continued)

(b) Deferred tax asset is recognised for tax losses carried forward to the extent that the realisation of the related tax benefits throughfuture taxable profits is probable. The Group has not recognised the deferred tax asset in respect of tax losses of $135,518,000(2001: $99,829,000) which can be carried forward to offset against future taxable income subject to meeting certain statutoryrequirements of the relevant tax authorities. These tax losses have no expiry date except for the amount of $110,707,000 (2001:$78,841,000) which will expire between the year 2003 and 2007 (2001: 2002 and 2006).

As at 31 December 2002, the Group has unremitted earnings of overseas branches and subsidiaries amounting to $1,371,262,000(2001: $1,562,223,000). Deferred tax liability has not been established for withholding and other taxes that would be payableon these unremitted earnings as such amounts are permanently reinvested or remain invested offshore.

The movements in the deferred tax assets and liabilities of the Group and the Bank (prior to the offsetting of balances within thesame tax jurisdiction) during the financial year are as follows:

Deferred Tax Liabilities

2002 2001

Fair Value of Fair ValueDepreciable of Depreciable

Properties PropertiesAccelerated Acquired in Accelerated Acquired in

Tax Business Tax BusinessDepreciation Combination Others Total Depreciation Combination Others Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

The GroupAt 1 January

As previouslyreported 52,621 – 10,512 63,133 44,785 – 4,283 49,068

Prior yearadjustmentresultingfrom adoptionof revised SAS 12 – 53,087 – 53,087 – – – –

As restated 52,621 53,087 10,512 116,220 44,785 – 4,283 49,068Currency

translationdifferences 80 – 44 124 210 – 35 245

Acquisition ofsubsidiaries – – – – 9,450 53,087 3,814 66,351

Charged/(credited)to incomestatement (1,391) (3,561) (1,483) (6,435) (1,824) – 2,380 556

At 31 December 51,310 49,526 9,073 109,909 52,621 53,087 10,512 116,220



2002 2001Fair Value ofDepreciable

PropertiesAccelerated Acquired in Accelerated

Tax Business TaxDepreciation Combination Others Total Depreciation Others Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000

The BankAt 1 January 32,704 – 1,027 33,731 33,303 2,394 35,697Currency translation

differences (21) – 44 23 13 33 46Transfer from subsidiaries

upon merger 9,813 53,087 – 62,900 – – –Charged/(credited) to

income statement (2,838) (3,561) 1,138 (5,261) (612) (1,400) (2,012)

At 31 December 39,658 49,526 2,209 91,393 32,704 1,027 33,731

114

14 Tax(b) (continued)

Deferred Tax Assets

2002 2001Non-Tax Non-Tax

Deductible DeductibleGeneral General

Provisions Others Total Provisions Others Total$’000 $’000 $’000 $’000 $’000 $’000

The GroupAt 1 January

As previously reported – 5,679 5,679 – 4,106 4,106Prior year adjustment

resulting fromadoption ofrevised SAS 12 116,220 – 116,220 63,133 – 63,133

As restated 116,220 5,679 121,899 63,133 4,106 67,239Currency translation

differences (1,101) (140) (1,241) (673) (3) (676)Acquisition of subsidiaries – – – 53,760 3,062 56,822(Charged)/credited to

income statement (4,571) 6,441 1,870 – (1,486) (1,486)

At 31 December 110,548 11,980 122,528 116,220 5,679 121,899

The BankAt 1 January

As previously reported – 4,180 4,180 – 6,282 6,282Prior year adjustment

resulting fromadoption ofrevised SAS 12 42,710 – 42,710 42,710 – 42,710

As restated 42,710 4,180 46,890 42,710 6,282 48,992Currency translation

differences – 30 30 – (38) (38)Transfer from subsidiaries

upon merger 40,276 – 40,276 – – –(Charged)/credited to

income statement (4,360) 4,925 565 – (2,064) (2,064)

At 31 December 78,626 9,135 87,761 42,710 4,180 46,890



Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against currenttax liabilities and when the deferred income taxes relate to the same tax authority. The net amounts, determined after appropriateoffsetting, are shown in the balance sheets as follows:


$'000 $'000 $'000 $'000

Deferred tax assets (39,519) (29,218) (2,790) (14,033)Deferred tax liabilities 26,900 23,539 6,422 874

(12,619) (5,679) 3,632 (13,159)

15 Earnings Per ShareThe calculation of basic and diluted earnings per share (“EPS”) is determined based on the following profit attributable tomembers divided by the weighted average number of ordinary shares in issue:

The Group2002 2001$'000 $'000

Profit for the financial year attributable to membersfor computation of basic and diluted EPS 1,064,200 924,579

Number Number‘000 ‘000

Weighted average number of ordinary shares in issuefor computation of basic EPS 1,571,519 1,195,486

Adjustment for assumed exercise of share options 39 69

Weighted average number of ordinary sharesfor computation of diluted EPS 1,571,558 1,195,555

16 Share Capital(a)

The Group and The Bank2002 2001

Number of Number ofShares Shares

’000 $’000 ’000 $’000

Ordinary Shares of $1 EachAuthorised 3,000,000 3,000,000 3,000,000 3,000,000

Issued and fully paid:Balance at 1 January 1,571,109 1,571,109 1,052,451 1,052,451Shares issued upon exercise of options 494 494 377 377Shares issued as part consideration for

the acquisition of OUB – – 518,281 518,281

Balance at 31 December 1,571,603 1,571,603 1,571,109 1,571,109

116

16 Share Capital (continued)

(b) During the financial year, the Bank issued 494,000 (2001: 377,000) ordinary shares of $1 each to option holders who exercisedtheir rights. All newly issued shares rank pari passu in all respects with the previously issued shares.

(c) Details of the unissued ordinary shares of $1 each of the Bank under option at the end of the financial year are set out inNote 9(c).

17 Share Premium

The Group and The Bank2002 2001$'000 $'000

Balance at 1 January 786,192 783,488Share premium arising from the issue of shares to

option holders who exercised their rights 5,041 2,704

Balance at 31 December 791,233 786,192

The share premium account may only be utilised for specific purposes provided for by the Singapore Companies Act.



18 Non-Distributable Reserves(a) The Group

2002 2001Foreign Foreign

Currency Currency

Statutory Capital Translation Statutory Capital Translation

Reserves Reserves Reserves Others Total Reserves Reserves Reserves Others Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at

1 January 2,150,271 4,489,475 (80,875) 63,970 6,622,841 1,931,204 – (173,616) 62,889 1,820,477

Currency

translation

differences – – (14,514) – (14,514) – – 92,741 – 92,741

Transfer

from/(to)

revenue

reserves

(Note 19) 610,215 (1,000,109) – 5,187 (384,707) 219,067 – – 1,081 220,148

Transfer from

reserves

due to

bonus shares

issued by

subsidiary

(Note 19) – – – – – – 57,796 – – 57,796

Transfer from

share of

reserves

of associates

(Note 20) – – – 2,552 2,552 – – – – –

Premium

arising

from shares

issued as

part

consideration

for the

acquisition

of OUB – – – – – – 4,431,679 – – 4,431,679

Other

adjustments (2,968) – – – (2,968) – – – – –

Balance at 31

December 2,757,518 3,489,366 (95,389) 71,709 6,223,204 2,150,271 4,489,475 (80,875) 63,970 6,622,841

118

18 Non-Distributable Reserves (continued)

(b) The Bank

2002 2001Foreign Foreign

Currency CurrencyStatutory Capital Translation Statutory Capital Translation

Reserve Reserve Reserve Total Reserve Reserve Reserve Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 1 January 1,654,100 4,431,679 (9,545) 6,076,234 1,467,100 – (6,916) 1,460,184Currency translation

differences – – (15,601) (15,601) – – (2,629) (2,629)Transfer from/(to) revenue

reserves (Note 19) 741,193 (1,000,109) – (258,916) 187,000 – – 187,000Premium arising from

shares issued as partconsideration for theacquisition of OUB – – – – – 4,431,679 – 4,431,679

Balance at 31 December 2,395,293 3,431,570 (25,146) 5,801,717 1,654,100 4,431,679 (9,545) 6,076,234

(c) The statutory reserves of the Group and the Bank are maintained in accordance with the provisions of applicable laws andregulations. These reserves are non-distributable unless approved by the relevant authorities.

The capital reserve of the Bank represents the premium arising from the issue of shares in connection with the acquisition of OUBwhich was not transferred to the share premium account due to the relief provided for under Section 69B of the SingaporeCompanies Act. The balance at 31 December 2002 is net of the amount transferred to revenue reserves, following the receipt ofdividends paid out of OUB Group’s pre-acquisition profits.

The capital reserves of the Group comprise the capital reserve of the Bank and $57,796,000 relating to bonus shares which wereissued by a subsidiary as fully paid shares through capitalisation of the subsidiary’s revenue reserves.

The foreign currency translation reserves of the Group and the Bank relate to currency translation differences arising from the useof year-end exchange rates versus historical rates in translating the net assets of overseas branches, subsidiaries and associates.



19 Revenue Reserves(a) The Group

2002 2001General Retained General Retained

Reserves Profits Total Reserves Profits Total$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 JanuaryAs previously reported 1,148,706 1,987,504 3,136,210 916,528 1,875,760 2,792,288Prior year adjustments resulting

from adoption of revised SAS 12 – 63,133 63,133 – 63,133 63,133

As restated 1,148,706 2,050,637 3,199,343 916,528 1,938,893 2,855,421Net profit for the financial year

attributable to members – 1,064,200 1,064,200 – 924,579 924,579Transfer to general reserves 331,000 (331,000) – 234,140 (234,140) –Transfer to statutory reserves (Note 18) (519,604) (90,611) (610,215) – (219,067) (219,067)Transfer to other reserves (Note 18) – (5,187) (5,187) – (1,081) (1,081)Transfer from capital reserves (Note 18) – 1,000,109 1,000,109 – – –Transfer from share of

reserves of associates (Note 20) – 7,231 7,231 – – –Goodwill recovered on disposal of subsidiary – – – 15,231 – 15,231Transfer to capital reserves due to bonus

shares issued by subsidiary (Note 18) – – – (17,193) (40,603) (57,796)Other adjustments (2,129) – (2,129) – – –

Dividends:Final dividend in respect of financial

year ended 31 December 2001(2001: 31 December 2000) of 25 cents(2001: 25 cents) per share paid,net of tax at 22% (2001: 24.5%) – (306,454) (306,454) – (198,713) (198,713)

Interim dividend in respect of financialyear ended 31 December 2002(2001: 31 December 2001) of 15 cents(2001: 15 cents) per share paid,net of tax at 22% (2001: 24.5%) – (183,874) (183,874) – (119,231) (119,231)

Interim dividend in respect of financialyear ended 31 December 2002 of18.76 cents per share paid in specie,net of tax at 22% [Note 19(c)] – (230,020) (230,020) – – –

– (720,348) (720,348) – (317,944) (317,944)

Balance at 31 December 957,973 2,975,031 3,933,004 1,148,706 2,050,637 3,199,343

120

19 Revenue Reserves (continued)

(b) The Bank

2002 2001General Retained General RetainedReserve Profits Total Reserve Profits Total

$'000 $'000 $'000 $'000 $'000 $'000

Balance at 1 JanuaryAs previously reported 829,321 1,276,920 2,106,241 616,321 1,248,225 1,864,546Prior year adjustments resulting

from adoption of revised SAS 12 – 42,710 42,710 – 42,710 42,710

As restated 829,321 1,319,630 2,148,951 616,321 1,290,935 1,907,256Net profit for the financial year

attributable to members – 1,432,026 1,432,026 – 746,639 746,639Transfer to general reserve 328,000 (328,000) – 213,000 (213,000) –Transfer to statutory reserve (Note 18) (669,193) (72,000) (741,193) – (187,000) (187,000)Transfer from capital reserve (Note 18) – 1,000,109 1,000,109 – – –

Dividends:Final dividend in respect of financial

year ended 31 December 2001(2001: 31 December 2000) of 25 cents(2001: 25 cents) per share paid,net of tax at 22% (2001: 24.5%) – (306,454) (306,454) – (198,713) (198,713)

Interim dividend in respect of financialyear ended 31 December 2002(2001: 31 December 2001) of 15 cents(2001: 15 cents) per share paid,net of tax at 22% (2001: 24.5%) – (183,874) (183,874) – (119,231) (119,231)

Interim dividend in respect of financialyear ended 31 December 2002 of18.76 cents per share paid in specie,net of tax at 22% [Note 19(c)] – (230,020) (230,020) – – –

– (720,348) (720,348) – (317,944) (317,944)

Balance at 31 December 488,128 2,631,417 3,119,545 829,321 1,319,630 2,148,951



(c) The interim dividend paid in specie was effected as follows:(i) For every 1,000 shares held by shareholders, each shareholder received 40.88 ordinary shares of $1 each in the share capital

of Haw Par Corporation Limited (“Haw Par Shares”), fractions of a Haw Par Share disregarded, except that the Haw ParShares which would otherwise be distributed to Haw Par Corporation Limited pursuant to the distribution (in its capacityas shareholder of the Bank) and the Haw Par Shares which would otherwise be distributed to Overseas Shareholderspursuant to the distribution were dealt with in the manner described in the circular to shareholders of the Bank dated11 November 2002; and

(ii) The resultant fractional Haw Par Shares were aggregated and would be sold for the benefit of the Bank.

The dividend was accounted for at the market value of the Haw Par Shares distributed on the books closure date.

(d) In each financial year, the Group and the Bank transfer a certain amount of retained profits to general reserves. These generalreserves have not been earmarked for any particular purpose.

(e) The revenue reserves of the Group and the Bank are distributable except for the amount of $294,438,000 (2001: $248,724,000)being the Group’s share of revenue reserves of associates which is distributable only upon realisation by way of dividend ordisposal of investments in the associates.

20 Share of Reserves of Associates

The Group2002 2001$'000 $'000

Balance at 1 January 537,354 519,469Movements in other reserves of associates (374,356) 17,885Realisation of reserves in income statements on divestment of an associate (19,621) –Transfers on divestment of an associate:

To retained profits (7,231) –To other non-distributable reserves (2,552) –

Balance at 31 December 133,594 537,354

The balance comprises the Group’s share of associates’ post-acquisition revenue reserves at 1 January 1998, and other reserves,adjusted for goodwill arising from acquisition of associates prior to 1 January 2001. These reserves are non-distributable reservesuntil they are realised by way of dividend from or divestment of the associates. In the year of realisation, revaluation reservespreviously brought into the Group without going through the consolidated income statement are recognised in the consolidatedincome statement. In all other cases, they are transferred to other distributable or non-distributable reserves as appropriate.

The Group’s share of associates’ results after 1 January 1998 is included in revenue reserves of the Group.

122

21 Deposits of and Amounts Owing to Non-Bank Customers, Banks and Agents, and Subsidiaries(a)


Analysed by remaining maturity:Within 1 year 86,323,497 92,008,197 76,563,434 48,845,945Over 1 year but within 3 years 742,978 375,723 602,494 60,454Over 3 years but within 5 years 80,368 20,378 79,869 285Over 5 years 73,796 141,193 73,796 141,193

87,220,639 92,545,491 77,319,593 49,047,877

(b) Included in deposits of non-bank customers are:


Fixed rate deposits 47,286,535 54,418,511 39,292,729 25,667,261Savings and others 20,632,046 20,033,173 18,638,536 10,817,463

67,918,581 74,451,684 57,931,265 36,484,724

(c) Included in deposits and balances of banks and agents are:


Obligations on securities sold under repurchaseagreements (“REPOs”) 302,306 818,790 294,257 623,801

The related securities sold under REPOs are shown in Notes 24 and 25 to the financial statements.

22 Other Liabilities


Accrued interest payable 310,120 469,809 249,884 237,221Trading derivative financial instruments

at fair value (Note 39) 1,773,594 798,749 1,747,998 759,483Other liabilities 2,579,223 2,177,342 844,247 383,749

4,662,937 3,445,900 2,842,129 1,380,453



23 Debts Issued


$'000 $'000 $'000 $'000

(a) Subordinated NotesS$ 4.95% Subordinated Notes due 2016 callable

with step-up in 2011 (“S$ Notes”) 1,300,000 1,300,000 1,300,000 1,300,000US$ Subordinated Floating Rate Notes

due 2011 callable in 2002 (“US$ Notes”) – 2,347,068 – 2,347,068

1,300,000 3,647,068 1,300,000 3,647,068

Unamortised expenses incurred in connectionwith the issue of the Subordinated Notes (5,601) (7,973) (5,601) (7,973)

1,294,399 3,639,095 1,294,399 3,639,095

(b) Asset Backed Commercial Paper (“ABCP”)S$ ABCP 641,500 500,500 – –US$ ABCP 210,911 17,558 – –

852,411 518,058 – –

2,146,810 4,157,153 1,294,399 3,639,095

(a) The S$ Notes were issued at par on 30 September 2001 and mature on 30 September 2016. The S$ Notes may be redeemed atpar at the option of the Bank, in whole but not in part, on 30 September 2011 or at any interest payment date in the event ofcertain changes to the tax laws of Singapore, subject to the prior approval of the Monetary Authority of Singapore and certainother conditions. Interest is payable semi-annually at 4.95% per annum up to and including 29 September 2011. From andincluding 30 September 2011, interest is payable semi-annually at a fixed rate equal to the five-year Singapore Dollar InterestRate Swap (Offer Rate) as at 30 September 2011 plus 2.25% per annum.

The Bank has entered into interest rate swaps to manage the interest rate risk arising from the S$ Notes.

The US$ Notes were issued at par on 19 September 2001 and were fully redeemed on 26 March 2002 and 19 September 2002.Interest was payable quarterly at the three-month US$ LIBOR plus 2.28% per annum.

The S$ Notes and US$ Notes are unsecured.

(b) The ABCP were issued in relation to a $1 billion ABCP programme carried out by Archer 1 Limited, a special purpose entity(“SPE”) (Note 36). The ABCP have maturity of less than one year, and are secured by a first floating charge in favour of thetrustees, Bermuda Trust (Singapore) Limited, on all assets of the SPE. These assets have been included in the assets of the Groupas shown in Note 36.

Interest rates of the S$ ABCP and US$ ABCP range from 1.5% to 1.9% (2001: 1.6% to 2.7%) per annum and 2.1% to 2.45%(2001: 2.5% to 2.69%) per annum respectively.

124

23 Debts Issued(b) (continued)

The holders of the ABCP are entitled to receive payment comprising both the principal and interest as contracted in the ABCPbut only to the extent that there are available resources in the SPE to meet those payments. The holders of the ABCP have norecourse to the Group.

The SPE intends to issue new ABCP upon the maturity of outstanding ABCP for as long as the SPE intends to carry on its principalactivity of investment holding.

24 Singapore Government Treasury Bills and Securities(a)


Held as long-term investments, at cost 568,803 552,957 568,803 552,957

Others, at cost 7,692,630 8,189,938 7,434,030 3,741,930Provision for diminution in value (Note 33) (444) (31,062) – (22,476)

7,692,186 8,158,876 7,434,030 3,719,454

8,260,989 8,711,833 8,002,833 4,272,411

Market value at 31 December:Held as long-term investments 612,583 533,450 612,583 533,450Others 7,711,418 8,158,876 7,449,518 3,719,454

8,324,001 8,692,326 8,062,101 4,252,904

(b) Included in Singapore Government treasury bills and securities are:


Securities sold under repurchase agreements 294,257 810,410 294,257 623,801

25 Other Government Treasury Bills and Securities(a)


At cost 1,332,952 1,817,870 419,035 244,264Provision for diminution in value (Note 33) (4) (510) (4) (3)

1,332,948 1,817,360 419,031 244,261

Market value at 31 December 1,346,718 1,823,652 431,117 246,078



(b) Included in other government treasury bills and securities are:


$'000 $'000 $'000 $'000

Securities sold under repurchase agreements 8,049 8,380 – –

(c) Included in the Group’s other government treasury bills and securities is an amount of $723,335,000 (2001: $1,130,252,000)relating to promissory notes which are guaranteed by a foreign government authority. The Group is not entitled to sell, transfer,pledge, or create any lien or encumbrance over any of these promissory notes without the prior consent of that authority.

26 Dealing Securities


$'000 $'000 $'000 $'000

At cost:Quoted equity shares 94,581 182,407 68,414 78,611Quoted debt securities 75,383 356,177 52,878 121,572Unquoted marketable unit trusts 19,526 18,802 – –Unquoted equity shares 2,031 2,115 2,031 2,115Unquoted debt securities 458,249 181,099 331,116 162,681

649,770 740,600 454,439 364,979Provision for diminution in value (Note 33) (29,661) (59,611) (22,628) (6,875)

620,109 680,989 431,811 358,104

Market value at 31 December:Quoted equity shares 78,438 133,795 55,122 70,168Quoted debt securities 79,396 352,055 56,049 124,417Unquoted marketable unit trusts 14,585 15,771 – –

172,419 501,621 111,171 194,585

27 Placements and Balances with Banks and Agents(a)


$'000 $'000 $'000 $'000

Analysed by maturity period:Within 1 year 19,197,092 24,588,361 18,190,609 19,316,523Over 1 year but within 3 years 226,213 109,621 226,213 77,170Over 3 years but within 5 years – 47,608 – 3,184Over 5 years 2,916 – 2,916 –

19,426,221 24,745,590 18,419,738 19,396,877

126

27 Placements and Balances with Banks and Agents (continued)

(b) Included in placements and balances with banks and agents are:


Negotiable certificates of deposit, floating ratecertificates of deposit and other similar instruments 1,956,618 1,456,200 1,516,029 810,315

Government securities bought under reverserepurchase agreements 383,393 189,232 383,393 189,232

2,340,011 1,645,432 1,899,422 999,547

28 Trade Bills and Advances to Customers(a)


Gross trade bills 1,061,210 1,204,164 139,405 62,280Specific provisions (10,180) – – –

1,051,030 1,204,164 139,405 62,280

Gross advances to customers 61,277,545 63,006,762 52,521,429 24,382,913Specific provisions (1,726,403) (1,613,974) (1,326,679) (342,551)Interest-in-suspense (293,152) (270,356) (146,615) (68,668)General provisions (1,425,013) (1,434,502) (1,231,305) (538,133)

57,832,977 59,687,930 49,816,830 23,433,561

Total gross trade bills and advances to customers 62,338,755 64,210,926 52,660,834 24,445,193

(b) Total gross trade bills and advances to customers analysed by maturity period:


Within 1 year 29,393,922 27,723,225 23,986,707 11,148,964Over 1 year but within 3 years 10,045,408 10,411,987 9,471,390 4,161,913Over 3 years but within 5 years 6,626,850 7,303,078 6,030,506 2,946,549Over 5 years 16,272,575 18,772,636 13,172,231 6,187,767

62,338,755 64,210,926 52,660,834 24,445,193



(c) Total gross trade bills and advances to customers analysed by industry group:


$'000 $'000 $'000 $'000

Transport, storage and communication 2,057,485 2,313,020 1,878,186 862,002Building and construction 9,147,960 9,721,679 7,918,866 2,822,036Manufacturing 5,391,630 5,337,661 3,515,973 1,055,662Non-bank financial institutions 10,809,361 10,764,600 10,010,178 3,743,968General commerce 6,200,322 6,296,428 4,958,561 2,413,559Professionals and private individuals

(excluding housing loans) 9,335,235 9,500,073 7,698,203 3,654,031Housing loans 13,841,234 13,297,609 11,846,719 6,894,353Others 5,555,528 6,979,856 4,834,148 2,999,582

62,338,755 64,210,926 52,660,834 24,445,193

(d) At the balance sheet date, the gross amount of trade bills, advances and credit facilities granted to customers that are regardedas non-performing are as follows:


$'000 $'000 $'000 $'000

Substandard 3,618,373 3,851,284 2,669,371 895,592Doubtful 406,598 474,900 370,081 95,855Loss 1,590,410 1,617,850 1,116,729 318,658

Total non-performing loans and credit facilities 5,615,381 5,944,034 4,156,181 1,310,105

Non-performing loans and credit facilities are those classified as Substandard, Doubtful and Loss in accordance with MAS Notice612. All foreseeable losses relating to these non-performing loans and credit facilities have been provided for in the financialstatements.

128

28 Trade Bills and Advances to Customers (continued)

(e) The movements in provisions are as follows:

2002 2001Specific Interest-in- General Specific Interest-in- General

Provisions Suspense Provisions Total Provisions Suspense Provisions Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

The GroupBalance at 1 January 1,613,974 640,219 1,434,502 3,688,695 770,534 273,156 768,490 1,812,180Currency translation

differences (39,807) (13,871) (9,489) (63,167) 37,362 16,532 7,530 61,424Write-off against

provisions (256,675) (123,041) – (379,716) (383,665) (121,665) – (505,330)Charge/(write-back)

to income statements 426,196 – – 426,196 149,377 – (70,173) 79,204Interest suspended – 169,223 – 169,223 – 115,428 – 115,428Transfer to provision for

diminution in value ofinvestments andother assets (7,105) (2,030) – (9,135) (647) – – (647)

Acquisition ofsubsidiaries – – – – 1,041,013 356,768 728,655 2,126,436

Balance at 31 December 1,736,583 670,500 1,425,013 3,832,096 1,613,974 640,219 1,434,502 3,688,695

The BankBalance at 1 January 342,551 158,427 538,133 1,039,111 363,442 149,887 597,881 1,111,210Currency translation

differences (16,704) (7,988) (912) (25,604) 7,953 2,984 15 10,952Write-off against

provisions (222,841) (102,680) – (325,521) (130,946) (26,642) – (157,588)Charge/(write-back)

to income statements 312,804 – 16,126 328,930 102,102 – (59,763) 42,339Interest suspended – 101,962 – 101,962 – 32,198 – 32,198Transfer from subsidiaries

upon merger 910,869 357,848 677,958 1,946,675 – – – –

Balance at 31 December 1,326,679 507,569 1,231,305 3,065,553 342,551 158,427 538,133 1,039,111

General provisions comprise provisions for possible loan losses, contingencies and other banking risks.

The above interest-in-suspense includes amounts relating to interest receivable as shown in Note 29.



29 Other Assets


$'000 $'000 $'000 $'000

Interest receivable 846,965 965,132 724,265 435,872Interest-in-suspense (Note 28) (377,348) (369,863) (360,954) (89,759)

469,617 595,269 363,311 346,113

Trading derivative financial instruments atfair value (Note 39) 1,675,701 843,776 1,653,254 796,438

Other assets 1,943,485 1,628,776 1,112,890 589,853Provision for diminution in value of

other assets (Note 33) (76,656) (100,188) (64,670) (83,625)

3,542,530 2,372,364 2,701,474 1,302,666

4,012,147 2,967,633 3,064,785 1,648,779

30 Investment Securities


$'000 $'000 $'000 $'000

Quoted securities, at cost:Equity shares 816,856 754,684 550,487 99,730Debt securities 1,207,253 1,293,670 1,144,993 579,979

2,024,109 2,048,354 1,695,480 679,709Provision for diminution in value (Note 33) (21,814) (20,254) (9,405) (193)

2,002,295 2,028,100 1,686,075 679,516

Quoted securities, at fair value:Equity shares 9,360 9,027 – –Debt securities 784,218 254,372 – –

793,578 263,399 – –

Unquoted securities, at cost:Equity shares 453,476 450,358 318,622 74,684Debt securities 692,719 512,507 741,291 244,754

1,146,195 962,865 1,059,913 319,438Provision for diminution in value (Note 33) (89,490) (63,840) (58,969) (9,298)

1,056,705 899,025 1,000,944 310,140

Unquoted debt securities, at fair value 92,805 240,538 – –

Total investment securities 3,945,383 3,431,062 2,687,019 989,656

Market value at 31 December:Quoted equity shares 759,726 785,969 511,001 79,898Quoted debt securities 1,974,425 1,550,294 1,149,559 588,882

2,734,151 2,336,263 1,660,560 668,780

130

30 Investment Securities (continued)

Included in the cost of investment securities are:


Equity interests in companies in which the Grouphas significant influence 703,498 705,066 506,138 –

These equity interests relate to companies in which the Group, through its acquisition of the OUB Group, presently has equityinterests of 20 to 50 percent and over whose financial and operating decisions it has significant influence. These investmentshave not been accounted for as associates of the Group as they were acquired and held exclusively with a view to their subsequentdisposal in the near future.

31 Investments in Associates


Quoted securities, at cost:Equity shares 555,065 736,631 518,718 697,130Debt securities 2,068 2,068 – –Warrants 23,757 23,757 23,757 23,757

Unquoted securities, at cost:Equity shares 335,329 287,444 167,757 19,674Debt securities 2,014 – – –

918,233 1,049,900 710,232 740,561

Provision for diminution in value [Note 33(b)] – – (3,364) (2,960)Group’s share of post-acquisition reserves

of associates, net of dividends received 356,012 731,422 – –

1,274,245 1,781,322 706,868 737,601

Market value at 31 December:Quoted equity shares 701,321 1,095,208 507,617 878,338Quoted debt securities 2,476 2,374 – –Quoted warrants 36,017 45,979 36,017 45,979

739,814 1,143,561 543,634 924,317

The major associates of the Group as at the balance sheet date are set out in Note 47 to the financial statements. The carryingamount of the Group’s investments in associates includes unamortised goodwill amounting to $17,581,000 (2001: Nil).Amortisation has not commenced as the associate was acquired close to 31 December 2002.



32 Investments in Subsidiaries(a)

The Bank2002 2001$'000 $'000

Quoted equity shares, at cost 18,393 395,694

Unquoted equity shares, at cost 1,733,754 10,050,640Provision for diminution in value [Note 33(b)] (342,318) (185,736)

1,391,436 9,864,904

Total investments in subsidiaries 1,409,829 10,260,598

Market value of quoted equity shares at 31 December 70,967 745,559

The subsidiaries of the Group as at the balance sheet date are set out in Note 46 to the financial statements.

(b) On 2 January 2002, OUB, a wholly-owned subsidiary, was merged into the Bank under Section 14A of the Banking Act, Cap. 19.As a result of the merger, the businesses, assets, liabilities, interests, rights, privileges, obligations and commitments of OUBwere transferred to and vested in the Bank.

The net assets of OUB were partly transferred to the Bank by way of a pre-merger dividend of $692,684,000, representing agross dividend of $917,462,000 less tax at 24.5% of $224,778,000. The net dividend of $692,684,000 has been credited to theBank’s cost of investment in OUB. Arising from the merger, the unamortised goodwill of the Group in respect of OUB as at2 January 2002 amounting to $3,776,651,000 was transferred to the Bank at net book value.

The fair values of identifiable assets, liabilities and off-balance sheet items as at 2 January 2002 transferred to the Bank were$36,058 million, $31,367 million and $27,135 million respectively.

The surplus arising from the merger of $145,482,000 represents the excess of the fair values of identifiable net assets of OUBand the unamortised goodwill of the Group in respect of OUB as at 2 January 2002 over the carrying amount of the Bank’sinvestment in OUB. The surplus has been recognised in the Bank’s income statement (Note 13) with no financial effect on theconsolidated income statement.

132

32 Investments in Subsidiaries (continued)

(c) On 3 June 2002, ICB, a wholly-owned subsidiary, was delisted from the Singapore Exchange after the Bank acquired theminority shareholders’ interests of 12.55% in ICB.

On 28 August 2002, ICB was merged into the Bank under Section 14A of the Banking Act, Cap.19. As a result of the merger, thebusinesses, assets, liabilities, interests, rights, privileges, obligations and commitments of ICB were transferred to and vestedin the Bank.

The net assets of ICB were partly transferred to the Bank by way of a pre-merger dividend which was dealt with as follows:

$’000

Gross pre-merger dividend of $881,855,000 net of tax at 22% amounting to $194,008,000 687,847Less: Dividend of $206,960,000 net of tax at 22% amounting to $45,531,000,

paid out of ICB’s pre-acquisition profits, credited to the Bank’s cost of investment in ICB 161,429

Gross dividend of $674,895,000 net of tax at 22% amounting to $148,477,000,paid out of ICB’s post-acquisition profits, credited to income statement (Notes 13 and 14) 526,418

The deficit arising from the merger of ICB of $57,422,000 represents the shortfall of the carrying amount of the net assets of ICBas at 28 August 2002 below the carrying amount of the Bank’s investment in ICB. The deficit has been charged to the Bank’sincome statement (Note 13) with no financial effect on the consolidated income statement.

The assets, liabilities and off-balance sheet items of ICB as at 28 August 2002 transferred to the Bank were $3,329 million,$3,050 million and $1,651 million respectively.

(d) During the financial year, the Group increased its interest in a subsidiary, United Overseas Bank Philippines, from 60% to 100%.Approval has been given by the authorities in the Philippines for the acquisition subject to the fulfilment of certain conditions.

(e) During the financial year, the Group acquired the following subsidiaries:

Interest Acquired Consideration Paid% $’000

OUB Optimix Funds Management Limited 50 2,243UOB Investment Consultancy (Beijing) Limited

[formerly known as UOB Centek Technology(Beijing) Investment Consulting Co., Ltd] 50 196

The acquisitions had no material effect on the Group’s balance sheet and results for the current financial year.

(f) During the financial year, certain subsidiaries of the Group were disposed of, liquidated or placed into members’ voluntaryliquidation.

The disposal and liquidations had no material effect on the Group’s and the Bank’s balance sheets and results for the currentfinancial year.



33 Movements in the Provisions for Diminution in Value of Investments and Other Assets(a) The Group

OtherSingapore Government

Government TreasuryTreasury Bills Bills and Dealing Other Investment Fixed

and Securities Securities Securities Assets Securities Assets Total $’000 $’000 $’000 $’000 $’000 $’000 $’000

2002At 1 January 31,062 510 59,611 100,188 84,094 37,325 312,790Currency translation

differences – (10) (182) (478) (2,502) (3) (3,175)Write-off against

provisions – (139) (47,690) (325) (18,945) – (67,099)(Write-back)/charge

to income statement (30,618) (357) 17,922 (22,729) 39,522 17,189 20,929Transfer from specific

provisions and interest-in-suspense for tradebills and advancesto customers – – – – 9,135 – 9,135

At 31 December 444 4 29,661 76,656 111,304 54,511 272,580

2001At 1 January 3 879 20,089 57,946 15,655 36,236 130,808Currency translation

differences – (6) 596 2,329 746 1,528 5,193Write-off against

provisions – – (4,895) (154) (794) – (5,843)Charge/(write-back)

to income statement 30,595 (660) (9,990) 34,820 5,941 2,051 62,757Transfer from specific

provisions for tradebills and advancesto customers – – – – 647 – 647

Acquisition of OUB 19 297 52,780 7,954 62,981 – 124,031Disposal of subsidiaries – – (51) (2,707) – (2,490) (5,248)Transfer from life funds 445 – – – – – 445Reclassification – – 1,082 – (1,082) – –

At 31 December 31,062 510 59,611 100,188 84,094 37,325 312,790

134

33 Movements in the Provisions for Diminution in Value of Investments and Other Assets (continued)

(b) The Bank

Singapore OtherGovernment GovernmentTreasury Bills Treasury Investments Investments

and Bills and Dealing Other Investment in in FixedSecurities Securities Securities Assets Securities Associates Subsidiaries Assets Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

2002At 1 January 22,476 3 6,875 83,625 9,491 2,960 185,736 2,417 313,583Currency

translationdifferences – – (138) (310) (1,115) – (325) (72) (1,960)

Charge/(write-back)to incomestatement (22,476) 1 15,891 (19,645) 43,561 (170) 156,907 12,624 186,693

Transfer fromsubsidiariesupon merger – – – 1,000 16,437 574 – 1,928 19,939

At 31 December – 4 22,628 64,670 68,374 3,364 342,318 16,897 518,255

2001At 1 January – 565 18,600 49,488 4,291 20,084 207,848 2,557 303,433Currency

translationdifferences – (8) 693 103 292 (22) 1,668 50 2,776

Write-offagainstprovisions – – – (24) – – (10,745) – (10,769)

Charge/(write-back)to incomestatement 22,476 (554) (12,418) 34,058 4,908 (17,102) (13,035) (190) 18,143

At 31 December 22,476 3 6,875 83,625 9,491 2,960 185,736 2,417 313,583



34 Fixed Assets(a) The Group

2002 2001Office Office

Equipment, Equipment,Computers, Computers,

Land and Fixtures and Land and Fixtures andBuildings Other Assets Total Buildings Other Assets Total

$’000 $’000 $’000 $’000 $’000 $’000

Balances at 1 JanuaryCost/valuation 1,656,256 960,289 2,616,545 1,259,109 599,190 1,858,299Accumulated depreciation (161,082) (693,623) (854,705) (169,738) (401,316) (571,054)Provision for

diminution in value (37,325) – (37,325) (36,236) – (36,236)

Net book value 1,457,849 266,666 1,724,515 1,053,135 197,874 1,251,009

Movements during thefinancial year:Currency translation

differences (7,889) (4,033) (11,922) 5,847 3,139 8,986Additions 177,351 96,679 274,030 5,352 106,863 112,215Acquisition of subsidiaries – – – 512,149 79,069 591,218Disposal of subsidiaries – – – (48,354) (15,681) (64,035)Disposals (40,538) (20,011) (60,549) (46,819) (29,889) (76,708)Depreciation charge (25,054) (89,482) (114,536) (21,410) (74,709) (96,119)Provision for


Net book valueat 31 December 1,544,530 249,819 1,794,349 1,457,849 266,666 1,724,515

Balances at 31 DecemberCost/valuation 1,795,322 841,312 2,636,634 1,656,256 960,289 2,616,545Accumulated depreciation (196,281) (591,493) (787,774) (161,082) (693,623) (854,705)Provision for


Net book value 1,544,530 249,819 1,794,349 1,457,849 266,666 1,724,515

136

34 Fixed Assets (continued)

(b) The Bank

2002 2001Office Office

Equipment, Equipment,Computers, Computers,

Land and Fixtures and Land and Fixtures andBuildings Other Assets Total Buildings Other Assets Total

$’000 $’000 $’000 $’000 $’000 $’000

Balances at 1 JanuaryCost/valuation 572,865 412,647 985,512 615,112 371,908 987,020Accumulated depreciation (84,422) (288,541) (372,963) (88,275) (257,613) (345,888)Provision for


Net book value 486,026 124,106 610,132 524,280 114,295 638,575

Movements during thefinancial year:Currency translation

differences 721 (128) 593 571 431 1,002Additions 159,229 81,197 240,426 5,330 48,958 54,288Merger of subsidiaries 327,052 62,558 389,610 – 6 6Disposals (10,775) (17,832) (28,607) (36,412) (464) (36,876)Depreciation charge (13,705) (66,903) (80,608) (7,933) (39,120) (47,053)Net (charge)/write-back

of provision fordiminution in value (12,624) – (12,624) 190 – 190

Net book valueat 31 December 935,924 182,998 1,118,922 486,026 124,106 610,132

Balances at 31 DecemberCost/valuation 1,052,901 592,261 1,645,162 572,865 412,647 985,512Accumulated depreciation (100,080) (409,263) (509,343) (84,422) (288,541) (372,963)Provision for


Net book value 935,924 182,998 1,118,922 486,026 124,106 610,132

(c) Based on directors’ valuation, the estimated market values of the land and buildings of the Group and the Bank included in fixedassets as at 31 December 2002 were $2,747 million and $1,629 million respectively (2001: $2,766 million and $1,202 millionrespectively). The excess of the estimated market value over the net book value of the land and buildings is not recognised in thefinancial statements.

(d) Included in the land and buildings of the Group and the Bank are leasehold properties with net book value at 31 December 2002amounting to $1,130.6 million and $770.3 million respectively (2001: $1,055 million and $436.1 million respectively). The restof the properties are freehold.



(e) Certain freehold and leasehold land and buildings of the Group and of the Bank are included on the basis of valuations made byindependent valuers with subsequent additions at cost. The dates of these valuations are as follows:

(i) The leasehold land at Bonham Street on which UOB Plaza 2 is sited April 1970

(ii) Certain freehold and leasehold land and buildings of Chung Khiaw Realty, Limited December 1969

(iii) Certain freehold land and buildings of United Overseas Bank (Malaysia) Bhd November 1965

(f) Provisions for diminution in value are in respect of certain properties in Singapore, Malaysia, Hong Kong S.A.R., China, Thailand,the Philippines and United Kingdom which are written down to their estimated market values as determined by the Bank’sinternal professionally qualified valuers.

35 Goodwill


$'000 $'000 $'000 $'000

Balance at 1 January 3,776,651 – – –Goodwill arising on acquisition of OUB – 3,824,457 – –Transfer to the Bank on the merger of OUB

into the BankAt cost – – 3,824,457 –Accumulated amortisation – – (47,806) –

– – 3,776,651 –

Goodwill arising on acquisition of additionalshares in subsidiaries 110,482 – – –

Negative goodwill arising on acquisition ofadditional shares in a subsidiary (25,533) – – –

Amortisation during the financial year (195,554) (47,806) (191,223) –

Balance at 31 December 3,666,046 3,776,651 3,585,428 –

Goodwill, at cost 3,909,406 3,824,457 3,824,457 –Accumulated amortisation (243,360) (47,806) (239,029) –

3,666,046 3,776,651 3,585,428 –

36 Consolidation of Special Purpose EntityA special purpose entity (“SPE”), Archer 1 Limited (“Archer”), which is incorporated in Singapore, has been consolidated in theGroup’s financial statements in accordance with Interpretation of Statement of Accounting Standard (“INT”) 5: Consolidation –Special Purpose Entities, as the Bank has the majority residual benefits of Archer.

The principal activity of Archer is to carry on the business of investment holding, and for that purpose to issue notes and bonds[Note 23(b)] and apply the proceeds from the notes and bonds towards the purchase of debt securities.

138

36 Consolidation of Special Purpose Entity (continued)

The effects of the consolidation on the Group’s balance sheet as at 31 December 2002 and the income statement for thefinancial year then ended are as follows:

The GroupIncrease/(Decrease)

$’000

Balance SheetAssetsPlacements and balances with banks and agents 70,277Investment securities 816,383Other assets 13,178

899,838

LiabilitiesDebts issued 852,411Other liabilities 44,427

896,838

Off-Balance Sheet ItemsDerivative financial instruments (contract or underlying principal amount) (1,154,568)

Income StatementProfit after tax for the year 3,000

37 DividendsThe directors have proposed a final dividend in respect of the financial year ended 31 December 2002 of 25 cents per share netof tax at 22%, amounting to a total of $306,463,000. These financial statements do not reflect this proposed dividend, whichwill be accounted for in shareholders’ equity as an appropriation of retained profits in the year ending 31 December 2003. Theproposed final dividend in respect of the financial year ended 31 December 2001 was 25 cents per share net of tax at 22%,amounting to a total of $306,366,000 based on the number of shares in issue on 31 December 2001.

38 Contingent Liabilities


Direct credit substitutes 3,244,290 2,953,396 3,340,645 1,882,535Transaction-related contingencies 3,632,120 2,700,046 2,911,975 979,080Trade-related contingencies 1,806,060 2,019,823 1,378,571 639,083Other contingent liabilities 236,501 114,918 171,064 34,562

8,918,971 7,788,183 7,802,255 3,535,260

In the normal course of business, the Group and the Bank conduct businesses involving acceptances, guarantees, performancebonds and indemnities. The majority of these facilities are reimbursable by corresponding obligations of customers. These contingentliabilities are unsecured.



39 Derivative Financial Instruments(a) The Group

Contract or Trading Derivatives Total DerivativesUnderlying

Principal Fair Values Fair Values Amount Assets Liabilities Assets Liabilities

$’000 $’000 $’000 $’000 $’000

2002Foreign Exchange ContractsForwards 6,515,318 105,348 53,300 105,421 53,425Swaps 77,252,945 963,335 993,300 987,669 1,052,909Options purchased 6,875,269 65,013 – 65,189 –Options written 8,078,330 – 66,780 – 66,838

Interest Rate ContractsForward rate agreements 2,758,502 1,132 2,097 1,149 2,104Swaps 26,885,279 536,937 648,304 589,619 707,572Futures 1,800,952 1,137 3,147 1,137 3,147Options purchased 266,795 1,581 – 2,058 –Options written 186,795 – – – 477

Equity-Related ContractsSwaps 48,935 – – 1,942 1,942Futures 11,221 36 41 36 41Options purchased 94,585 1,081 – 1,081 –Options written 158,343 – 6,625 – 6,625

Credit-Related ContractsCredit default swaps 346,134 101 – 1,137 7,589

131,279,403 1,675,701 1,773,594 1,756,438 1,902,669

2001Foreign Exchange ContractsForwards 5,090,877 54,923 56,176 55,507 56,437Swaps 52,994,548 595,292 553,101 851,300 716,888Options purchased 2,039,132 17,380 – 17,380 –Options written 1,678,972 – 14,291 – 14,291

Interest Rate ContractsForward rate agreements 28,348 – – 3 –Swaps 18,623,942 173,268 162,291 191,901 182,730Futures 957,496 1,085 1,183 1,085 1,183Options purchased 94,401 – – 416 –Options written 94,401 – – – 416

Equity-Related ContractsSwaps 49,594 1,050 1,049 1,050 1,049Futures 16,931 550 – 550 –Options purchased 33,196 28 – 28 –Options written 40,703 – 4,809 – 4,809

Credit-Related ContractsCredit default swaps 465,841 200 5,849 200 5,849

82,208,382 843,776 798,749 1,119,420 983,652

140

39 Derivative Financial Instruments (continued)

(b) The Bank

Contract or Trading Derivatives Total DerivativesUnderlying

Principal Fair Values Fair Values Amount Assets Liabilities Assets Liabilities

$’000 $’000 $’000 $’000 $’000

2002Foreign Exchange ContractsForwards 6,328,130 104,859 52,317 104,914 52,437Swaps 77,271,888 965,688 997,173 990,022 1,056,782Options purchased 6,875,269 65,013 – 65,189 –Options written 8,078,330 – 66,780 – 66,838

Interest Rate ContractsForward rate agreements 2,723,680 1,132 2,097 1,132 2,097Swaps 26,327,718 512,979 619,932 565,239 676,969Futures 304,926 770 3,033 770 3,033Options purchased 266,795 1,581 – 2,058 –Options written 186,795 – – – 477

Equity-Related ContractsSwaps 48,935 – – 1,942 1,942Futures 11,221 36 41 36 41Options purchased 93,692 1,080 – 1,080 –Options written 158,343 – 6,625 – 6,625

Credit-Related ContractsCredit default swaps 363,493 116 – 1,152 7,589

129,039,215 1,653,254 1,747,998 1,733,534 1,874,830

2001Foreign Exchange ContractsForwards 4,885,902 52,958 54,061 52,958 54,061Swaps 47,859,314 597,318 560,260 719,917 606,100Options purchased 2,039,728 17,335 – 17,335 –Options written 1,678,972 – 14,291 – 14,291

Interest Rate ContractsForward rate agreements 28,348 – – 3 –Swaps 13,022,414 127,014 124,702 145,647 145,141Futures 560,394 1,035 1,143 1,035 1,143Options purchased 94,401 – – 416 –Options written 94,401 – – – 416

Equity-Related ContractsFutures 16,931 550 – 550 –Options purchased 33,196 28 – 28 –Options written 40,703 – 4,809 – 4,809

Credit-Related ContractsCredit default swaps 25,914 200 217 200 217

70,380,618 796,438 759,483 938,089 826,178



(c) Derivative financial instruments are instruments whose values change in response to the change in one or more “underlying”,such as foreign exchange rate, interest rate, security price and credit price. They include forwards, swaps, futures and options.

In its normal course of business, the Group and the Bank customise derivatives to meet the specific needs of its customers. TheGroup and the Bank also transact in these derivatives for proprietary trading purposes as well as to manage its assets/liabilitiesand structural positions. The risks associated with the use of derivatives, as well as management’s policies for controlling theserisks are set out in Note 44.

The tables above analyse the contract or underlying principal amounts (notional amounts) and the fair values of the Group’s andthe Bank’s derivative financial instruments at the balance sheet date. A positive valuation represents a financial asset and anegative valuation a financial liability. The notional amounts of these instruments indicate the volume of transactions outstandingat the balance sheet date for both trading and non-trading instruments. They do not necessarily indicate the amounts of futurecash flows or the fair value of the derivatives and, therefore, do not represent total amounts at risk.

40 Commitments


$'000 $'000 $'000 $'000

Capital commitments contracted but not providedfor on purchase of fixed assets 15,442 27,248 11,183 22,467

Undrawn credit facilities 35,947,655 34,353,956 29,912,571 15,058,810Others 563,392 310,964 469,187 308,321

36,526,489 34,692,168 30,392,941 15,389,598

41 Cash and Cash Equivalents

The Group2002 2001$'000 $'000

Cash and balances with central banks 4,213,458 3,329,827Singapore Government treasury bills and securities 8,260,989 8,711,833Other government treasury bills and securities,

less non-cash equivalents of $723,335,000 (2001: $1,130,252,000) 609,613 687,108

13,084,060 12,728,768

142

42 Segment Information(a) Primary Reporting Format – Business Segments

The Group – 2002

Individual Institutional Global InvestmentBanking Banking Treasury Banking Others Total

$’000 $’000 $’000 $’000 $’000 $’000

Income before operating expenses 979,637 1,237,471 452,160 97,768 312,209 3,079,245

Less: Operating expenses 414,776 292,025 135,826 58,726 30,128 931,481Less: Provisions 151,142 303,135 (30,274) 22,292 5,187 451,482

Segment profit before tax1 413,719 642,311 346,608 16,750 276,894 1,696,282

Unallocated corporate expenses (142,496)

1,553,786Goodwill amortisation (195,554)Operating profit after goodwill

amortisation and provisions 1,358,232Exceptional items (48,065)Share of profit of associates 123,403

Profit before tax 1,433,570Tax and minority interests (369,370)

Net profit for the financial yearattributable to members 1,064,200

Other information:Segment assets2 21,639,614 39,002,623 37,599,853 2,643,047 1,546,563 102,431,700Investment in associates 1,274,245Goodwill 3,666,046Unallocated assets 97,430

Total assets 107,469,421

Gross customer loans 23,176,469 39,162,286 – – – 62,338,755Non-performing loans (“NPLs”) 1,681,801 3,933,580 – – – 5,615,381Specific provision and

interest-in-suspense forNPLs (cumulative) 471,145 1,558,590 – – – 2,029,735

Dealing securities (gross)Debt securities* – – 250,170 461,388 – 711,558Equity shares and unit trusts – – 2,761 113,377 – 116,138

Non-dealing securities (gross)Debt securities* – 723,335 9,984,029 1,486,090 – 12,193,454Equity shares – – 9,610 1,270,082 – 1,279,692

Segment liabilities2 40,175,325 29,794,953 21,895,606 86,771 22,610 91,975,265Debts issued

Asset backed commercial paper – – 852,411 – – 852,411Subordinated notes 1,294,399

Provision for current and deferred tax 472,897Unallocated liabilities 72,176

Total liabilities 94,667,148

Capital expenditure 26,103 30,684 8,685 619 207,939 274,030Depreciation of fixed assets 18,275 20,177 4,985 990 70,109 114,536

* Include government treasury bills and securities.



The Group – 2001

Individual Institutional Global InvestmentBanking Banking Treasury Banking Others Total

$’000 $’000 $’000 $’000 $’000 $’000

Income before operating expenses 716,629 846,299 414,506 85,338 161,319 2,224,091

Less: Operating expenses 313,001 262,084 114,175 49,238 39,441 777,939Less: Provisions 22,796 108,549 33,829 (1,083) 704 164,795

Segment profit before tax1 380,832 475,666 266,502 37,183 121,174 1,281,357

Unallocated corporate expenses (95,904)

1,185,453Goodwill amortisation (47,806)Operating profit after goodwill

amortisation and provisions 1,137,647Exceptional items (11,997)Share of profit of associates 71,912

Profit before tax 1,197,562Tax and minority interests (272,983)

Net profit for the financial yearattributable to members 924,579

Other information:Segment assets2 22,832,255 42,298,876 38,948,249 3,126,387 1,035,266 108,241,033Investment in associates 1,781,322Goodwill 3,776,651Unallocated assets 89,088


Gross customer loans 22,797,682 41,413,244 – – – 64,210,926Non-performing loans (“NPLs”) 1,494,628 4,449,406 – – – 5,944,034Specific provision and

interest-in-suspense forNPLs (cumulative) 376,248 1,508,082 – – – 1,884,330

Dealing securities (gross)Debt securities* – – 801,744 123,720 – 925,464Equity shares and unit trusts – – 5,825 197,499 – 203,324

Non-dealing securities (gross)Debt securities* – 1,130,252 10,164,379 1,179,033 – 12,473,664Equity shares – – 12,132 1,201,937 – 1,214,069

Segment liabilities2 39,695,187 37,354,597 18,910,850 68,107 24,833 96,053,574Debts issued

Asset backed commercial paper – – 518,058 – – 518,058Subordinated notes 3,639,095

Provision for current and deferred tax 498,974Unallocated liabilities 62,994


Capital expenditure 19,776 26,888 5,839 1,714 57,998 112,215Depreciation of fixed assets 17,102 26,341 3,445 1,176 48,055 96,119

* Include government treasury bills and securities.

144

42 Segment Information(a) Primary Reporting Format – Business Segments (continued)

Notes:1 Segment profit before tax represents segment income less operating expenses that are directly attributable, and those that

can be allocated on a reasonable basis, to a segment. Inter-segment transactions are charged at internal transfer prices,estimated based on the costs in providing the products and services, and after taking into account competitive marketprices that are charged to unaffiliated customers.

2 Segment assets and liabilities comprise operating assets and liabilities that are directly attributable, and those that can beallocated on a reasonable basis, to a segment.

Business segment information is stated after elimination of inter-segment transactions.

The Group’s businesses are organised into five segments, based on the types of products and services that it provides worldwide.These segments are Individual Banking, Institutional Banking, Global Treasury, Investment Banking, and Others that includemainly property-related activities.

Individual BankingThe Group’s Individual Banking segment encompasses personal financial services and private banking. The personal financialservices business delivers a wide array of consumer services that includes the issue of credit and debit cards, loans and mortgages,deposit services and investment advisory services. Private Banking offers wealth management services for high networth individuals.

Institutional BankingInstitutional Banking encompasses commercial credit, corporate banking and capital markets. The commercial credit businessserves the small and medium-sized enterprises, while corporate banking serves the large corporations, institutions and governments.Both commercial credit and corporate banking provide customers with a broad range of products and services that includefinancing options, trade services, custody services and cash management services. The capital markets business offers corporatefinance services, including initial public offering and corporate advisory services.

Global TreasuryThe Group’s Global Treasury segment extends a wide range of treasury capabilities in foreign exchange, money market, fixedincome, derivatives, leveraged trading and futures broking. It is a dominant player in Singapore dollar treasury instruments anda major primary dealer in Singapore Government securities. Global Treasury also provides banknotes services and a full range ofgold products, and continues to lead in the provision of Singapore dollar cheque clearing services to correspondent banks.

Investment BankingInvestment Banking comprises asset management, venture capital management, insurance and proprietary investment activities.

OthersOther operations of the Group include stockbroking and property-related activities.



(b) Secondary Reporting Format – Geographical SegmentsThe Group’s activities can be analysed into the following geographical areas:

The GroupIncome Before Profit

Operating Expenses Before Tax Total Assets2002 2001 2002 2001 2002 2001$’000 $’000 $’000 $’000 $’000 $’000

Singapore (including AsianCurrency Units) 2,330,211 1,725,398 1,264,829 1,100,816 77,285,422 83,042,172

Malaysia 356,599 247,319 230,129 122,452 9,256,549 9,588,852Other ASEAN countries 125,146 80,981 (25,164) (39,461) 3,220,872 4,008,776

481,745 328,300 204,965 82,991 12,477,421 13,597,628Other Asia-Pacific countries 187,867 115,996 111,846 35,511 8,365,078 8,135,632Rest of the world 79,422 54,397 47,484 26,050 5,675,454 5,336,011

3,079,245 2,224,091 1,629,124 1,245,368 103,803,375 110,111,443Goodwill – – (195,554) (47,806) 3,666,046 3,776,651

3,079,245 2,224,091 1,433,570 1,197,562 107,469,421 113,888,094

With the exception of Singapore and Malaysia, no individual country contributed 10% or more of the Group’s total incomebefore operating expenses, total profit before tax or total assets.

The geographical segment information is based on the location where the assets and transactions are booked. It provides anapproximation to geographical segment information that is based on the location of customers and assets.

Geographical segment information is stated after elimination of inter-segment transactions.

146

43 Non-Current Assets and LiabilitiesTo comply with the disclosure requirements of the Ninth Schedule of the Singapore Companies Act, set out below are the non-current assets and non-current liabilities of the Group and the Bank. Assets and liabilities other than those disclosed below arecurrent.


Non-Current AssetsSingapore Government treasury bills and securities 568,803 552,957 568,803 552,957Trade bills and advances to customers (gross) 32,944,833 36,487,701 28,674,127 13,296,229Placements and balances with banks and agents 229,129 157,229 229,129 80,354Investment securities 3,945,383 3,431,062 2,687,019 989,656Investments in associates 1,274,245 1,781,322 706,868 737,601Investments in subsidiaries – – 1,409,829 10,260,598Fixed assets 1,794,349 1,724,515 1,118,922 610,132Deferred tax assets 39,519 29,218 2,790 14,033Goodwill 3,666,046 3,776,651 3,585,428 –

44,462,307 47,940,655 38,982,915 26,541,560

Non-Current LiabilitiesDeposits of and amounts owing to

non-bank customers, banks and agents,and subsidiaries 897,142 537,294 756,159 201,932

Deferred tax liabilities 26,900 23,539 6,422 874Debts issued 1,294,399 3,639,095 1,294,399 3,639,095

2,218,441 4,199,928 2,056,980 3,841,901

44 Financial Risk ManagementThe Group’s activities are principally related to transacting in and the use of financial instruments, including derivatives. Transactionsin, and the use of, financial instruments expose the Group to a variety of financial risks, mainly credit risk, foreign exchange risk,interest rate risk and liquidity risk.

Managing financial risks is an integral part of the Group’s business and it is carried out centrally by the various specialistcommittees of the UOB Group under policies approved by the directors of the Bank. These policies not only include the parametersfor the risks that the Group may undertake for the various financial instruments, but also directions on the types of business thatthe Group may engage in, guidelines for accepting customers for all types of financial instruments and the terms under whichcustomer business is conducted.

The various specialist committees of the UOB Group have established processes to identify, measure, monitor and ultimately,mitigate these financial risks. Additionally, the Board of Directors of the Bank and the UOB Group’s Risk Management & ComplianceSector provide an independent oversight to ensure that those risk management policies are complied with through a variety ofestablished controls and reporting processes.



Discussions on the main financial risks that the Group is exposed to and how it manages these risks are set out below.

(a) Credit RiskCredit risk is the potential loss arising from any failure by the Group’s customers or counter-parties to fulfil their obligations asand when these obligations fall due. These obligations may arise from lending, trade finance, investments, receivables underderivative contracts and other credit-related activities undertaken by the Group.

The Credit Committee is responsible for the management of credit risk of the Group. Apart from direct credit management, suchas approval of significant loans, it is also responsible for providing directions and timely guidance on lending to different geographicalsectors, industries and products.

In general, the Group monitors the levels of credit risk it undertakes through regular review by management, with independentoversight of its credit concentration and portfolio quality by the Credit Committee.

In respect of its lending-related activities, management regularly reviews the amount of risk accepted in relation to one borroweror groups of borrowers, geographical and industry segments, types of acceptable security, level of non-performing loans andadequacy of provisioning requirements.

In respect of other credit risk activities such as money market transactions and derivative financial instruments, the Group hascounter-party risk policies that set out approved counter-parties with whom the Group may transact and their respective transactionlimits.

Exposure to credit risk is also managed in part by obtaining collateral or right to call for collateral when certain exposurethresholds are exceeded, the right to terminate transactions upon the occurrence of unfavourable events, the right to reset theterms of transactions after specified time periods or upon the occurrence of unfavourable events, and entering into nettingagreements with counter-parties that permit the Group to offset receivables and payables with such counter-parties.

Given the amounts, types and nature of its existing products and businesses, the Group assesses that industry concentration riskarises primarily from the Group’s trade bills and advances to customers. Note 28(c) analyses the Group’s total gross trade billsand advances to customers by industry classification as at the balance sheet date.

148

44 Financial Risk Management(a) Credit Risk (continued)

The following table analyses the Group’s financial assets and credit-related contingent liabilities by geographical concentrationas at the balance sheet date:

The GroupTrade Bills and Placements

Advances to and Balances Other Credit-RelatedCustomers with Banks Financial Contingent

(Gross) and Agents Assets Liabilities Total$’000 $’000 $’000 $’000 $’000

2002Five Regional Countries* 8,453,200 2,671,000 5,338,661 1,691,170 18,154,031Greater China 2,481,400 1,870,800 747,960 503,610 5,603,770Singapore 46,403,255 2,579,000 16,836,822 5,641,270 71,460,347Others** 5,000,900 12,305,421 735,836 846,420 18,888,577

62,338,755 19,426,221 23,659,279 8,682,470 114,106,725

2001Five Regional Countries* 8,562,500 1,988,000 5,432,807 1,334,350 17,317,657Greater China 2,911,600 911,400 705,078 352,180 4,880,258Singapore 47,328,426 5,865,750 15,973,179 5,701,345 74,868,700Others** 5,408,400 15,980,440 608,962 285,390 22,283,192

64,210,926 24,745,590 22,720,026 7,673,265 119,349,807

* The Five Regional Countries refer to Malaysia, Indonesia, the Philippines, Thailand and South Korea.

** Others comprise mainly other OECD countries.

In addition to the above, the Group also has potential credit risk exposure to undrawn credit facilities of $35,948 million (2001:$34,354 million). These represent unused portions of the approved credit facilities mainly in the form of loans, guarantees andtrade finance products such as letters of credit. However, the likely amount of exposure is less than the total undrawn creditfacilities since most of these are contingent upon customers maintaining specific credit standards and are cancellable at theoption of the Group subject to notice requirements. From past experience, many of these undrawn credit facilities are expectedto expire without being drawn upon.

(b) Foreign Exchange RiskForeign exchange risk is the risk to earnings and value of foreign currency assets, liabilities and derivative financial instrumentscaused by fluctuations in foreign exchange rates.

The Group’s foreign exchange exposures arise from its foreign exchange position-taking or proprietary business, customerfacilitation business as well as a certain amount of structural foreign currency exposures as represented by the net asset valuesof its overseas branches and investments in overseas subsidiaries, and long-term investments in overseas properties. The Grouputilises mainly foreign currency forwards and swaps to hedge its foreign exchange exposures.

Foreign exchange risk is managed through risk limits and policies as approved by the Asset Liability Committee. These limits andpolicies, such as on the level of exposure by currency and in total for both overnight and intra-day positions, are independentlymonitored on a daily basis by the UOB Group’s Risk Management & Compliance Sector, through the Business Area Control Unit.

The following table sets out the Group’s assets, liabilities and derivative financial instruments by currency as at the balance sheetdate. The off-balance sheet gap represents the net contract/underlying principal amounts of derivatives, which are principallyused to reduce the Group’s exposure to currency movements.



The Group – 2002Hong

Singapore US Malaysian Kong AustralianDollars Dollars Ringgit Dollars Dollars Thai Baht Others Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

AssetsCash and balances

with central banks 2,178,006 27,110 1,529,513 2,968 8,104 28,597 439,160 4,213,458Government treasury

bills and securities 8,260,989 50,883 73,757 48,840 39,052 747,157 373,259 9,593,937Placements and

balances with banksand agents 2,976,417 10,865,952 630,182 707,554 956,826 20,618 3,198,395 19,355,944

Trade bills and advancesto customers 38,808,810 7,928,389 5,466,862 1,386,682 1,721,819 1,000,815 2,570,630 58,884,007

Investment securities 1,341,025 1,423,365 33,651 51,121 19,374 11,105 249,359 3,129,000Investments in

associates 1,197,741 2 73,987 – – – 2,515 1,274,245Goodwill 3,556,184 – – – – 9,389 100,473 3,666,046Others 4,050,897 1,123,617 570,363 68,907 113,197 124,682 401,283 6,452,946

62,370,069 21,419,318 8,378,315 2,266,072 2,858,372 1,942,363 7,335,074 106,569,583Assets attributable

to SPE 899,838


LiabilitiesCurrent, fixed,

savings accountsand other depositsof non-bankcustomers 41,028,457 13,930,267 5,431,283 760,697 1,920,685 1,551,163 3,296,029 67,918,581

Deposits and balancesof banks and agents 3,411,755 11,226,120 741,514 995,957 616,653 281,564 2,028,495 19,302,058

Bills and drafts payable 94,856 11,089 45,860 665 189 7,328 3,878 163,865Debts issued 1,294,399 – – – – – – 1,294,399Other liabilities 3,327,582 436,923 1,019,908 82,854 25,480 37,793 160,867 5,091,407

49,157,049 25,604,399 7,238,565 1,840,173 2,563,007 1,877,848 5,489,269 93,770,310Liabilities attributable

to SPE 896,838


On-balance sheetopen position 13,213,020 (4,185,081) 1,139,750 425,899 295,365 64,515 1,845,805

Off-balance sheetopen position (3,187,522) 4,777,273 365,624 (406,175) (212,663) (136,639) (1,199,898)

Net open position 10,025,498 592,192 1,505,374 19,724 82,702 (72,124) 645,907

Net structuralposition – 43,564 769,579 (654) 111,302 6,870 338,018

150

44 Financial Risk Management(b) Foreign Exchange Risk (continued)

The Group – 2001Hong

Singapore US Malaysian Kong AustralianDollars Dollars Ringgit Dollars Dollars Thai Baht Others Total$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


with central banks 1,568,092 50,635 1,337,459 29,857 12,616 101,877 229,291 3,329,827Government treasury

bills and securities 8,711,833 73,695 208,435 68,934 32,742 1,155,766 277,788 10,529,193Placements and

balances with banksand agents 4,839,718 15,316,399 431,743 325,309 655,449 20,199 3,098,523 24,687,340

Trade bills and advancesto customers 39,247,425 9,274,726 5,778,996 1,686,868 1,381,770 858,587 2,663,722 60,892,094

Investment securities 1,010,408 1,479,640 149,395 8,051 85,587 32,063 191,981 2,957,125Investments in

associates 1,755,025 2 24,964 – – – 1,331 1,781,322Goodwill 3,776,651 – – – – – – 3,776,651Others 2,788,735 1,414,290 374,102 117,529 71,763 122,830 496,747 5,385,996

63,697,887 27,609,387 8,305,094 2,236,548 2,239,927 2,291,322 6,959,383 113,339,548Assets attributable

to SPE 548,546



savings accountsand other depositsof non-bankcustomers 45,258,917 15,552,335 5,618,313 794,490 1,263,153 2,081,411 3,883,065 74,451,684

Deposits and balancesof banks and agents 5,105,171 9,483,734 348,986 665,786 509,498 55,075 1,925,557 18,093,807

Bills and drafts payable 68,538 3,343 48,849 557 125 2,578 1,187 125,177Debts issued 1,292,027 2,347,068 – – – – – 3,639,095Other liabilities 1,618,773 453,183 521,681 70,405 38,297 37,720 1,174,327 3,914,386

53,343,426 27,839,663 6,537,829 1,531,238 1,811,073 2,176,784 6,984,136 100,224,149Liabilities attributable

to SPE 548,546


On-balance sheetopen position 10,354,461 (230,276) 1,767,265 705,310 428,854 114,538 (24,753)

Off-balance sheetopen position 534,213 853,534 (103,132) (318,143) (283,602) (171,294) (511,576)

Net open position 10,888,674 623,258 1,664,133 387,167 145,252 (56,756) (536,329)

Net structuralposition – 46,634 1,021,315 368,095 112,738 10,178 317,686



Other foreign exchange exposures of the Group are primarily structural foreign currency exposures. These comprise the net assetvalues of the Group’s overseas branches and investments in overseas subsidiaries, and long-term investments in overseas properties.

Where possible, the Group mitigates the effect of structural currency exposures by funding all the Group’s investments inoverseas branches with borrowings in the same currencies as the functional currencies of the respective overseas branches. Ona selective basis, the Group’s investments in overseas subsidiaries and long-term investments in overseas properties are alsofunded in the same functional currencies. The Group also hedges some of the structural foreign currency exposures usingforeign exchange derivatives.

The structural currency exposures of the Group are as follows:

StructuralCurrency Hedges by Net

Exposures Funding in Other Structural in Overseas Respective Currency Currency

Currency of Structural Exposures Operations Currencies Hedges Exposures$’000 $’000 $’000 $’000

2002Australian dollars 241,901 37,280 93,319 111,302Hong Kong dollars 301,138 16,533 285,259 (654)Indonesian rupiah 98,863 – (51) 98,914Malaysian ringgit 769,579 – – 769,579Philippine pesos 77,567 – – 77,567Thai baht 119,973 – 113,103 6,870US dollars 386,674 209,162 133,948 43,564Others 228,084 9,357 57,190 161,537

Total 2,223,779 272,332 682,768 1,268,679

2001Australian dollars 156,626 36,622 7,266 112,738Hong Kong dollars 576,597 17,633 190,869 368,095Indonesian rupiah 51,650 – (36) 51,686Malaysian ringgit 1,021,315 – – 1,021,315Philippine pesos 71,068 – – 71,068Thai baht 81,877 – 71,699 10,178US dollars 375,830 199,283 129,913 46,634Others 223,008 12,752 15,324 194,932

Total 2,557,971 266,290 415,035 1,876,646

(c) Interest Rate RiskInterest rate risk is the risk to earnings and value of financial instruments caused by fluctuations in interest rates.

Sensitivity to interest rates arises from the differences in the maturities and repricing dates of assets, liabilities and off-balancesheet items. These mismatches are actively monitored and managed as part of the overall interest rate risk management processwhich is conducted in accordance with the Group’s policies.

The following table shows the interest rate sensitivity gap, by time bands, on which interest rates of instruments are nextrepriced on a contractual basis or, if earlier, the dates on which the instruments mature.

152

44 Financial Risk Management(c) Interest Rate Risk (continued)

The Group – 2002

Non- Over 7 Over Over Over Total EffectiveInterest Up to Days to 1 to 3 3 to 12 1 to 3 Over Interest Interest

Total Bearing 7 Days 1 Month Months Months Years 3 Years Bearing Rate$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 %

AssetsCash and

balances

with central

banks 4,213,458 4,213,458 – – – – – – – –Government

treasury

bills and

securities 9,593,937 – 214,443 1,045,295 2,087,502 2,337,488 2,875,334 1,033,875 9,593,937 2.36Placements

and

balances

with banks

and

agents 19,355,944 46,692 2,042,919 7,654,531 4,832,063 4,550,610 226,213 2,916 19,309,252 1.76Trade bills and

advances to

customers 58,884,007 – 19,085,476 9,854,814 7,644,059 14,924,121 4,853,634 2,521,903 58,884,007 4.63Dealing and

investment

securities 3,749,109 1,436,944 130,910 137,039 662,312 220,777 125,439 1,035,688 2,312,165 4.99Investments in

associates 1,274,245 1,270,163 – – – 2,014 2,068 – 4,082 2.31Goodwill 3,666,046 3,666,046 – – – – – – – –Others 5,832,837 5,832,837 – – – – – – – –

106,569,583 16,466,140 21,473,748 18,691,679 15,225,936 22,035,010 8,082,688 4,594,382 90,103,443 –Assets

attributable

to SPE 899,838




The Group – 2002

Non- Over 7 Over Over Over Total EffectiveInterest Up to Days to 1 to 3 3 to 12 1 to 3 Over Interest Interest

Total Bearing 7 Days 1 Month Months Months Years 3 Years Bearing Rate$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 %


savingsaccountsand otherdeposits ofnon-bankcustomers 67,918,581 5,341,916 19,525,284 19,825,301 9,792,529 12,536,409 742,978 154,164 62,576,665 1.43

Deposits andbalances ofbanks andagents, andbills anddraftspayable 19,465,923 721,619 2,567,341 7,750,258 5,289,989 3,136,716 – – 18,744,304 1.67

Debts issued 1,294,399 – – – – – – 1,294,399 1,294,399 4.95Others 5,091,407 5,091,407 – – – – – – – –

93,770,310 11,154,942 22,092,625 27,575,559 15,082,518 15,673,125 742,978 1,448,563 82,615,368 –

Liabilitiesattributableto SPE 896,838

Totalliabilities 94,667,148

Shareholders’funds andminorityinterests 12,799,273 12,799,273 – – – – – – – –

Shareholders’fundsattributableto SPE 3,000

Totalshare-holders’fundsandminorityinterests 12,802,273

107,469,421

Neton-balancesheetposition (7,488,075) (618,877) (8,883,880) 143,418 6,361,885 7,339,710 3,145,819 7,488,075 –

Netoff-balancesheetposition – 193,829 (205,618) (60,918) 491,295 (1,414,935) 996,347 – –

Net interestratesensitivitygap (7,488,075) (425,048) (9,089,498) 82,500 6,853,180 5,924,775 4,142,166 7,488,075 –

154

44 Financial Risk Management(c) Interest Rate Risk (continued)

The Group – 2001

Non- Over 7 Over Over Over Total Effective

Interest Up to Days to 1 to 3 3 to 12 1 to 3 Over Interest Interest

Total Bearing 7 Days 1 Month Months Months Years 3 Years Bearing Rate

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 %

AssetsCash and

balances with

central banks 3,329,827 3,329,827 – – – – – – – –

Government

treasury

bills and

securities 10,529,193 – 18,300 1,341,663 2,135,759 2,180,855 2,335,009 2,517,607 10,529,193 3.54

Placements

and

balances

with banks

and agents 24,687,340 37,460 5,443,105 7,903,518 3,694,198 7,451,830 109,621 47,608 24,649,880 2.86

Trade bills and

advances to

customers 60,892,094 – 20,827,428 16,100,213 7,348,703 6,483,402 7,843,418 2,288,930 60,892,094 5.55

Dealing and

investment

securities 3,638,114 1,554,586 9,040 99,850 180,489 903,939 583,081 307,129 2,083,528 4.44

Investments in

associates 1,781,322 1,779,254 – – – – 2,068 – 2,068 1.50

Goodwill 3,776,651 3,776,651 – – – – – – – –

Others 4,705,007 4,705,007 – – – – – – – –

113,339,548 15,182,785 26,297,873 25,445,244 13,359,149 17,020,026 10,873,197 5,161,274 98,156,763 –

Assets

attributable

to SPE 548,546




The Group – 2001

Non- Over 7 Over Over Over Total Effective

Interest Up to Days to 1 to 3 3 to 12 1 to 3 Over Interest Interest

Total Bearing 7 Days 1 Month Months Months Years 3 Years Bearing Rate

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 %


savings

accounts

and other

deposits of

non-bank

customers 74,451,684 6,749,568 23,058,979 19,585,026 11,491,515 13,029,302 375,723 161,571 67,702,116 1.93

Deposits and

balances of

banks and

agents, and

bills and

drafts

payable 18,218,984 125,177 5,810,760 4,374,135 5,163,894 2,745,018 – – 18,093,807 2.95

Debts issued 3,639,095 – – – 2,345,343 – – 1,293,752 3,639,095 4.46

Others 3,914,386 3,914,386 – – – – – – – –

100,224,149 10,789,131 28,869,739 23,959,161 19,000,752 15,774,320 375,723 1,455,323 89,435,018 –

Liabilities

attributable

to SPE 548,546

Totalliabilities 100,772,695

Shareholders’funds andminorityinterests 13,115,399 13,115,399 – – – – – – – –

113,888,094

Neton-balancesheetposition (8,721,745) (2,571,866) 1,486,083 (5,641,603) 1,245,706 10,497,474 3,705,951 8,721,745 –

Netoff–balancesheetposition – 202,472 381,312 351,082 (491,907) (339,452) (103,507) – –

Net interestratesensitivity

gap (8,721,745) (2,369,394) 1,867,395 (5,290,521) 753,799 10,158,022 3,602,444 8,721,745 –

Actual repricing dates may differ from contractual dates because prepayments and contractual terms do not reflect the actualbehavioural patterns of assets and liabilities. Therefore, the Group manages its interest rate risk by applying dynamic simulationmodelling techniques on the above information, which is based on contractual terms.

156

44 Financial Risk Management (continued)

(d) Liquidity RiskLiquidity risk is the risk that the Group is unable to meet its cash flow obligations as and when they fall due, such as upon thematurity of deposits and loan draw-downs.

It is not unusual for a bank to have mismatches in the contractual maturity profile of its assets and liabilities. The Group managesliquidity risk in accordance with a framework of liquidity policies, controls and limits that is approved by the Asset LiabilityCommittee, with the main objectives of honouring all cash outflow commitments on an on-going basis, satisfying statutoryliquidity and reserve requirements, and avoiding raising funds at market premiums or through forced sale of assets.

These controls and policies include the setting of limits on the minimum proportion of maturing funds available to meet such callsand on the minimum level of inter-bank and other borrowing facilities that should be in place to cover withdrawals at unexpectedlevels of demand.

Additionally, the Group is required by law in the various locations that it operates from, including Singapore, to maintain a certainpercentage of its liability base in the form of cash and other liquid assets as a buffer against unforeseen liquidity requirements.

The following table shows the maturity analysis of the Group’s assets and liabilities based on contractual terms.

The Group – 2002Over 7 Over Over Over Non-

Up to Days to 1 to 3 3 to 12 1 to 3 Over SpecificTotal 7 Days 1 Month Months Months Years 3 Years Maturity$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


with central banks 4,213,458 4,213,458 – – – – – –Government treasury

bills and securities 9,593,937 214,443 1,045,187 2,086,935 1,974,078 3,237,786 1,035,508 –Placements and

balances withbanks and agents 19,355,944 2,158,301 7,654,531 4,763,373 4,550,610 226,213 2,916 –

Trade bills andadvances tocustomers 58,884,007 12,337,096 3,911,198 4,218,308 6,225,664 9,815,778 22,375,963 –

Dealing andinvestmentsecurities 3,749,109 31,012 53,142 117,933 536,617 461,936 1,196,897 1,351,572

Investments inassociates 1,274,245 – – – 2,014 25,825 – 1,246,406

Goodwill 3,666,046 – – – – – – 3,666,046Others 5,832,837 136,620 119,349 45,931 79,379 50,592 37,746 5,363,220

106,569,583 19,090,930 12,783,407 11,232,480 13,368,362 13,818,130 24,649,030 11,627,244Assets

attributableto SPE 899,838





Up to Days to 1 to 3 3 to 12 1 to 3 Over SpecificTotal 7 Days 1 Month Months Months Years 3 Years Maturity$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


savings accountsand otherdeposits ofnon-bankcustomers 67,918,581 24,867,200 19,825,301 9,792,529 12,536,409 742,978 154,164 –

Deposits andbalances ofbanks andagents, andbills and draftspayable 19,465,923 3,288,960 7,750,258 5,289,989 3,136,716 – – –

Debts issued 1,294,399 – – – – – 1,294,399 –Others 5,091,407 269,113 15,158 11,184 14,149 428 88 4,781,287

93,770,310 28,425,273 27,590,717 15,093,702 15,687,274 743,406 1,448,651 4,781,287



Shareholders’funds andminorityinterests 12,799,273 – – – – – – 12,799,273

Shareholders’fundsattributableto SPE 3,000

Totalshareholders’funds andminorityinterests 12,802,273

107,469,421

Net maturitymismatch (9,334,343) (14,807,310) (3,861,222) (2,318,912) 13,074,724 23,200,379 (5,953,316)

158

44 Financial Risk Management(d) Liquidity Risk (continued)


Up to Days to 1 to 3 3 to 12 1 to 3 Over SpecificTotal 7 Days 1 Month Months Months Years 3 Years Maturity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


with central banks 3,329,827 3,329,827 – – – – – –Government treasury

bills and securities 10,529,193 18,300 1,341,663 2,135,759 2,180,855 2,335,009 2,517,607 –Placements and

balances withbanks and agents 24,687,340 5,480,565 7,903,518 3,694,198 7,451,830 109,621 47,608 –

Trade bills andadvances tocustomers 60,892,094 12,298,234 6,085,570 3,083,811 4,852,874 9,865,132 24,706,473 –

Dealing andinvestmentsecurities 3,638,114 – 56,905 112,979 206,449 713,338 1,189,764 1,358,679

Investments inassociates 1,781,322 – – – – 25,825 – 1,755,497

Goodwill 3,776,651 – – – – – – 3,776,651Others 4,705,007 120,224 59,491 30,147 47,441 96,440 241,526 4,109,738

113,339,548 21,247,150 15,447,147 9,056,894 14,739,449 13,145,365 28,702,978 11,000,565

Assetsattributableto SPE 548,546





Up to Days to 1 to 3 3 to 12 1 to 3 Over Specific Total 7 Days 1 Month Months Months Years 3 Years Maturity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000


savings accountsand otherdeposits ofnon-bankcustomers 74,451,684 29,808,547 19,585,026 11,491,515 13,029,302 375,723 161,571 –

Deposits andbalances ofbanks andagents, andbills and draftspayable 18,218,984 5,906,780 4,390,738 5,176,448 2,745,018 – – –

Debts issued 3,639,095 – – – – – 3,639,095 –Others 3,914,386 188,457 123,821 72,652 82,374 2,375 130 3,444,577

100,224,149 35,903,784 24,099,585 16,740,615 15,856,694 378,098 3,800,796 3,444,577



Shareholders’funds andminorityinterests 13,115,399 – – – – – – 13,115,399

113,888,094

Net maturitymismatch (14,656,634) (8,652,438) (7,683,721) (1,117,245) 12,767,267 24,902,182 (5,559,411)

The contractual maturity profile often does not reflect the actual behavioural patterns. In particular, the Group has a significantamount of “core” deposits of non-bank customers which are contractually at call and thus, included in the “Up to 7 Days” timeband, but history shows that such deposits provide a stable source of long-term funding for the Group.

In addition to the above, the Group is also subject to liquidity requirements to support calls under outstanding contingentliabilities and undrawn credit facility commitments as disclosed in Notes 38 and 40. The total outstanding contractual amounts donot represent future cash requirements since the Group expects many of these contingent liabilities and commitments (such asdirect credit substitutes and undrawn credit facilities) to expire without being called or drawn upon, and many of the commitmentsto pay third parties (such as letters of credit) are reimbursed immediately by customers.

160

45 Fair Values of Financial InstrumentsFinancial instruments comprise financial assets, financial liabilities and also derivative financial instruments. The fair value of afinancial instrument is the amount at which the instrument could be exchanged or settled between knowledgeable and willingparties in an arm’s length transaction, other than in a forced or liquidation sale. The information presented herein representsbest estimates of fair values of financial instruments at the balance sheet date.

The on-balance sheet financial assets and financial liabilities of the Group and the Bank whose fair values are required to bedisclosed in accordance with Singapore Statement of Accounting Standard 32 (“SAS 32”) comprise all its assets and liabilitieswith the exception of deferred tax assets, investments in subsidiaries, investments in associates, fixed assets, goodwill, provisionfor current tax and deferred tax liabilities. The estimated fair values of those on-balance sheet financial assets and financialliabilities as at the balance sheet date approximate their carrying amounts as shown in the balance sheets, except for thefollowing financial assets and liabilities:

The Group The BankCarrying Estimated Carrying EstimatedAmount Fair Value Amount Fair Value

$’000 $’000 $’000 $’000

2002Singapore Government treasury bills and securities 8,260,989 8,324,001 8,002,833 8,062,101Other government treasury bills and securities 1,332,948 1,346,718 419,031 431,117Dealing securities 620,109 623,411 431,811 435,045Investment securities 3,945,383 3,929,455 2,687,019 2,690,153Debts issued 2,146,810 2,272,921 1,294,399 1,420,510

2001Singapore Government treasury bills and securities 8,711,833 8,692,326 4,272,411 4,252,904Other government treasury bills and securities 1,817,360 1,823,652 244,261 246,078Dealing securities 680,989 683,801 358,104 358,104Investment securities 3,431,062 3,680,783 989,656 987,119Debts issued 4,157,153 4,153,412 3,639,095 3,635,354

The fair values of derivative financial instruments are shown in Note 39.

The fair values of financial instrument contingent liabilities and undrawn credit facilities are not readily ascertainable. Thesefinancial instruments are presently not sold or traded. They generate fees that are in line with market prices for similar arrangements.The estimated fair value may be represented by the present value of the fees expected to be received, less associated costs ofobligations or services to be rendered. The Group and the Bank assess that their respective fair values are unlikely to be significant.

Where available, quoted and observable market prices are used as the measure of fair values, such as for government treasurybills and securities, quoted securities, debts issued and most of the derivative financial instruments.



Where quoted and observable market prices are not available, fair values are estimated based on a range of methodologies andassumptions, the principal ones being as follows:

– The fair values of cash and balances with central banks, and placements and balances with banks, agents and related companiesare considered to approximate their carrying values because most of these are (a) of negligible credit risk and (b) either short-term in nature or repriced frequently.

– The Group and the Bank consider the carrying amount of advances to customers as a reasonable approximation of its fair value.Presently, market and observable prices do not exist as there is currently no ready market wherein exchanges between willingparties occur. In estimating the fair value, loans are categorised into homogeneous groups by product types, risk characteristics,maturity and pricing profiles, and non-performing accounts. In evaluating the reasonableness of fair value, the Group and theBank performed analysis on each of the homogeneous groups, taking into account various hypothetical credit spread andmarket interest rate scenarios, future expected loss experience and estimated forced sale values of collateral. General provisionsare also deducted in arriving at the fair value as a discount for credit risk inherent in the large portfolio of advances to customers.

– The Group and the Bank consider the carrying amounts of all its deposits, such as deposits of non-bank customers and depositsand balances of banks, agents and related companies, as reasonable approximation of their respective fair values given thatthese are mostly either repayable on demand or in the shorter term, and the interest rates will be repriced.

– For derivative financial instruments where quoted and observable market prices are not available, fair values are arrived at usinginternal pricing models.

As assumptions were made regarding risk characteristics of the various financial instruments, discount rates, future expected lossexperience and other factors, changes in the uncertainties and assumptions could materially affect these estimates and theresulting fair value estimates.

In addition, the fair value information for non-financial assets and liabilities is excluded as they do not fall within the scope ofSAS 32 which requires fair value information to be disclosed. These include fixed assets, long-term relationships with customers,franchise and other intangibles, which are integral to the full assessment of the Group’s and the Bank’s financial positions and thevalue of their net assets.

162

46 SubsidiariesThe subsidiaries of the Group as at the balance sheet date are as follows:

Percentage ofPaid–Up Capital Held By

Country of Place of Carrying Amount ofIncorporation Business The Bank Subsidiaries Bank’s Investment

2002 2001 2002 2001 2002 2001% % % % $'000 $'000

Commercial BankingFar Eastern Bank Limited Singapore Singapore 77 76 – – 37,912 37,387

* PT Bank UOB Indonesia Indonesia Indonesia 99 80 – – 48,462 30,562* United Overseas Bank (Canada) Canada Canada 100 100 – – – 18,155* United Overseas Bank

(Malaysia) Bhd Malaysia Malaysia 45 45 55 55 123,731 123,731* United Overseas Bank Philippines Philippines Philippines 100 60 – – # 21,101* UOB Radanasin Bank

Public Company Limited Thailand Thailand 79 75 – – 124,087 83,618Industrial & Commercial Bank Limited Singapore Inactive 100 87 – – – 384,286

* Overseas Union Bank(Malaysia) Berhad Malaysia Inactive – – 100 100 – –

Overseas Union Bank Limited Singapore Inactive 100 100 – – – 9,014,903

Merchant Banking* UOB Asia Hong Kong Hong Kong

(Hong Kong) Limited S.A.R. S.A.R. 50 50 50 50 11,687 11,687UOB Asia Limited Singapore Singapore 100 100 – – 9,747 9,747

* UOB Australia Limited Australia Australia 100 100 – – 10,865 10,670+ OUB Australia Ltd

(under voluntary liquidation) Australia Inactive 100 – – 100 – –

FinanceOverseas Union Trust Limited Singapore Singapore 100 ### – 53 158,468 398

+ OUB Finance (H.K.) Limited Hong Kong(liquidated during the year) S.A.R. Inactive – – – 100 – –

Leasing* OUB Credit Bhd Malaysia Malaysia – – 100 100 – –+ OUL Sdn Bhd

(under voluntary liquidation) Malaysia Inactive 100 – – 100 – –

Insurance* PT UOB Life - Sun Assurance Indonesia Indonesia – – 80 80 – –

United Overseas Insurance Limited Singapore Singapore 51 51 – – 7,700 7,700* UOB Insurance (H.K.) Limited Hong Kong Hong Kong

S.A.R. S.A.R. – – 100 100 – –UOB Life Assurance Limited Singapore Singapore 88 88 12 12 31,509 40,116





2002 2001 2002 2001 2002 2001% % % % $'000 $'000

Investment* Chung Khiaw Bank (Malaysia) Bhd Malaysia Malaysia 100 100 – – 152,403 152,403

OUB.com Pte Ltd Singapore Singapore 100 – – 100 17,267 –* Overseas Union Holdings

(Aust) Pty Limited Australia Australia – – 100 100 – –Overseas Union Holdings

Private Limited Singapore Singapore 100 – – 100 181,882 –Overseas Union Securities Limited Singapore Singapore 16 6 36 46 10,693 3,310Overseas Union Securities

Trading Pte Ltd Singapore Singapore – – 100 100 – –United Investments Limited Singapore Singapore 100 100 – – 26,100 26,100UOB Capital Investments Pte Ltd Singapore Singapore 100 100 – – 50,000 50,000UOB Capital Management Pte Ltd Singapore Singapore 100 100 – – 29,700 3,100UOB Equity Holdings (Pte) Ltd Singapore Singapore 100 100 – – 9,600 9,600

* UOB Finance (H.K.) Limited Hong Kong Hong KongS.A.R. S.A.R. 100 100 – – 19,760 19,557

** UOB Holdings (USA) Inc. United States United Statesof America of America 100 100 – – 17,956 20,114

* UOB Realty (H.K.) Limited Hong Kong Hong KongS.A.R. S.A.R. – – 100 100 – –

** UOB Venture Management People’s People’s(Shanghai) Co., Ltd Republic of Republic of

China China – – 100 100 – –+ asia-reach.com Pte Ltd

(under voluntary liquidation) Singapore Inactive 100 100 – – – ##CKB (2000) Limited Singapore Inactive 100 100 – – – –

+ ICB Finance Limited Hong Kong(under voluntary liquidation) S.A.R. Inactive 100 – – 100 – –

ICB Pte. Ltd. Singapore Inactive 100 – – 100 ## –+ OUB Investments Pte Ltd

(under voluntary liquidation) Singapore Inactive 100 – – 100 – –+ Overseas Union Facilities (H.K.) Ltd Hong Kong

(liquidated during the year) S.A.R. Inactive – – – 100 – –+ Overseas Union Garden (Private)

Limited(under voluntary liquidation) Singapore Inactive 100 – – 100 – –

+ Securities Investments Pte Ltd(under voluntary liquidation) Singapore Inactive 100 – – 100 – –

* United Overseas Finance(Malaysia) Bhd. Malaysia Inactive – – 100 100 – –

UOF (2000) Limited Singapore Inactive 100 100 – – 10 10

164

46 Subsidiaries (continued)



2002 2001 2002 2001 2002 2001% % % % $'000 $'000

Trustee/Investment ManagementOUB Asset Management Ltd Singapore Singapore 100 – – 100 13,455 –

++ OUB Optimix FundsManagement Limited Singapore Singapore – – 100 – – –

Overseas Union Bank Trustees Ltd Singapore Singapore 20 – 80 51 1,437 –United Overseas Bank

Trustee Limited Singapore Singapore 20 20 80 80 100 100UOB Asset Management Ltd Singapore Singapore 100 100 – – 2,000 2,000UOB Bioventures

Management Pte Ltd Singapore Singapore – – 100 100 – –** UOB Global Capital (Dublin) Ltd Ireland Ireland – – 100 100 – –** UOB Global Capital LLC United States United States

of America of America – – 70 70 – –UOB Global Capital Private Limited Singapore Singapore 70 70 – – 67 72

** UOB Global Capital SARL France France – – 100 100 – –UOB Hermes Asia

Management Pte Limited Singapore Singapore – – 60 60 – –* UOB Investment Advisor

(Taiwan) Ltd Taiwan Taiwan – – 100 100 – –UOB Venture Management

Private Limited Singapore Singapore 100 100 – – 250 250* UOB-OSK Asset

Management Sdn Bhd Malaysia Malaysia – – 70 70 – –+ OUB (Australia) Securities

Pty Ltd (liquidated during the year) Australia Inactive – – – 100 – –+ OUB-TA Asset

Management Sdn Bhd(under voluntary liquidation) Malaysia Inactive – – 51 51 – –

Nominee Services* Chung Khiaw Nominees Hong Kong Hong Kong

(H.K.) Limited S.A.R. S.A.R. 100 100 – – 2 2Far Eastern Bank Nominees

(Private) Limited Singapore Singapore – – 100 100 – –Mandarin Nominees Pte Ltd Singapore Singapore – – 100 100 – –

* OUB Nominees (Asing) Sdn Bhd Malaysia Malaysia – – 100 100 – –* OUB Nominees (Tempatan) Sdn Bhd Malaysia Malaysia – – 100 100 – –

Overseas Union Bank Nominees(Private) Limited Singapore Singapore 100 – – 100 192 –

* Overseas Union Nominees(H.K.) Limited[formerly known asOverseas Union Bank Nominees Hong Kong Hong Kong(H.K.) Limited] S.A.R. S.A.R. 100 – – 100 4 –





2002 2001 2002 2001 2002 2001% % % % $'000 $'000

Overseas Union Trust(Nominees) Pte Ltd Singapore Singapore – – 100 100 – –

Tye Hua Nominees Private Limited Singapore Singapore 100 100 – – 10 10United Merchant Bank

Nominees (Pte) Ltd Singapore Singapore – – 100 100 – –* United Overseas Bank Nominees Hong Kong Hong Kong

(H.K.) Limited S.A.R. S.A.R. 100 100 – – 4 4United Overseas Bank Nominees

(Private) Limited Singapore Singapore 100 100 – – 10 10* United Overseas Nominees

(Asing) Sdn Bhd Malaysia Malaysia – – 100 100 – –* United Overseas Nominees

(Tempatan) Sdn Bhd Malaysia Malaysia – – 100 100 – –* UOB Nominees (Australia) Limited Australia Australia – – 100 100 – –

** UOB Nominees (UK) Limited United UnitedKingdom Kingdom 100 100 – – 2 2

* UOBM Nominees (Asing) Sdn Bhd Malaysia Malaysia – – 100 100 – –* UOBM Nominees

(Tempatan) Sdn Bhd Malaysia Malaysia – – 100 100 – –Chung Khiaw Nominees

(Private) Limited Singapore Inactive 100 100 – – 10 10+ Grand Orient Nominees Pte Ltd

(under voluntary liquidation) Singapore Inactive – – 100 100 – –ICB Nominees (Private) Limited Singapore Inactive 100 – – 100 10 –Lee Wah Nominees (S) Pte Ltd Singapore Inactive 100 100 – – ## ##

+ OUB Australia Nominees Pty Ltd(liquidated during the year) Australia Inactive – – – 100 – –

+ Overseas Union BankNominees (U.K.) Limited United(liquidated during the year) Kingdom Inactive – – – 100 – –

* Singapore UMB Hong Kong(Hong Kong) Limited S.A.R. Inactive – – 100 100 – –

UOF Nominees (Private) Limited Singapore Inactive 100 100 – – ## ##

StockbrokingGrand Orient Securities Pte Ltd Singapore Singapore – – 100 100 – –

* OUB Securities (H.K.) Limited Hong Kong Hong KongS.A.R. S.A.R. 100 – – 100 11,303 –

OUB Securities Pte Ltd Singapore Singapore 100 – – 100 41,156 –

166

46 Subsidiaries (continued)



2002 2001 2002 2001 2002 2001% % % % $'000 $'000

Gold/Futures DealingUOB Bullion and Futures Limited Singapore Singapore 100 100 – – 9,000 9,000

+ OUB Bullion & Futures Ltd(under voluntary liquidation) Singapore Inactive 100 – – 100 – –

Computer ServicesUnicom Databank Private Limited Singapore Singapore 100 100 – – ## ##

* UOB InfoTech Sdn Bhd Malaysia Inactive – – 100 100 – –

Management ServicesOverseas Union Management

Services Pte Ltd Singapore Singapore 100 – – 100 228 –A.I.M. Services Pte Ltd Singapore Inactive 100 – – 100 25 –ICB Management Pte. Ltd. Singapore Inactive 100 – – 100 25 –

+ Overseas Union ManagementServices Sdn Bhd(under voluntary liquidation) Malaysia Inactive 100 – – 100 – –

+ UOB ManagementServices Pte Ltd(under voluntary liquidation) Singapore Inactive 100 100 – – – ##

General ServicesUnited General Services (Pte) Ltd Singapore Singapore 100 100 – – ## ##

Consultancy and Research ServicesUOB Investment Consultancy (Beijing)

++ Limited [formerly known as People’s People’sUOB Centek Technology (Beijing) Republic of Republic ofInvestment Consulting Co., Ltd] China China – – 100 – – –

** UOB Venture United States United StatesManagement (USA) Inc. of America of America – – 100 100 – –

+ OUB Research Sdn Bhd(under voluntary liquidation) Malaysia Inactive – – 100 100 – –

PropertyChung Khiaw Realty, Limited Singapore Singapore/

Malaysia 99 99 – – 60,448 60,448Industrial & Commercial

Property (S) Pte Ltd Singapore Singapore 100 – – 100 32,000 –** UOB Realty (USA) Inc. United States United States

of America of America 100 100 – – 287 299** UOB Realty (USA) Ltd Partnership United States United States

of America of America 99 99 1 1 17,185 17,386


***


Percentage of

Paid–Up Capital Held ByCountry of Place of Carrying Amount ofIncorporation Business The Bank Subsidiaries Bank’s Investment

2002 2001 2002 2001 2002 2001% % % % $'000 $'000

UOB Warehouse Private Limited Singapore Singapore 100 100 – – 88,000 88,000FEB Realty Company Pte. Ltd. Singapore Inactive – – 100 100 – –

+ ICB Enterprises (Private) Limited(under voluntary liquidation) Singapore Inactive 100 100 – – – 495

+ Overseas Union Holdings Sdn Bhd

(under voluntary liquidation) Malaysia Inactive – – 100 100 – –

Property ManagementOUB Towers Pte Ltd Singapore Singapore 100 – – 100 32,554 –Overseas Union Developments

(Private) Limited Singapore Singapore 100 – – 100 16,539 –+ Overseas Union

Developments Sdn Bhd(under voluntary liquidation) Malaysia Inactive – – 100 100 – –

Overseas Union Facilities Sdn Bhd(disposed of during the year) Malaysia Inactive – – – 100 – –

+ Overseas Union ProjectManagement Pte Ltd(under voluntary liquidation) Singapore Inactive – – 100 100 – –

+ Overseas Union RealtyServices Pte Ltd(under voluntary liquidation) Singapore Inactive – – 100 100 – –

+ UOB Property Management Pte Ltd(under voluntary liquidation) Singapore Inactive 100 100 – – – ##

TravelUOB Travel Planners Pte Ltd Singapore Singapore 100 100 – – 3,987 3,987

+ UOB Travel (General Sales Agent)Pte Ltd(under voluntary liquidation) Singapore Inactive 55 55 – – – 268

1,409,829 10,260,598

Notes:

* Audited by other member firms of the worldwide PricewaterhouseCoopers organisation.

** Not required to be audited in country of incorporation.

*** Not audited by PricewaterhouseCoopers, Singapore or another member firm of the worldwide PricewaterhouseCoopers organisation.+ Not required to be audited as subsidiary has been put into liquidation.

++ This company was an associate at 31 December 2001 (see Note 47).# Investment cost is fully provided for.

## Investment cost is less than $1,000.### Percentage of paid-up capital held by the Bank is 0.2%.

168

47 Major Associates

Country ofIncorporation Effective Interest

Principal Activities and Business Held by the Group2002 2001

% %

Associates (Quoted)United International Securities Limited Investment Singapore 42 42United Overseas Land Limited Property/hotel Singapore 45 45UOB-Kay Hian Holdings Limited Stockbroking Singapore 40 39Haw Par Corporation Limited

(divested during the year) Conglomerate Singapore * 42

Associates (Unquoted)Ace Net Financial Services Pte Ltd Automated teller

machine services Singapore 50 50Affin-UOB Securities Sdn Bhd Stockbroking Malaysia 45 45Asfinco Singapore Limited Investment holding Singapore 40 39Clearing and Payment Services Pte Ltd Continuous linked settlement Singapore 33 33Network for Electronic Transfers

(Singapore) Pte Ltd Electronic funds transfer Singapore 33 40Novena Square Development Pte Ltd Property Singapore 20 20Novena Square Investment Pte Ltd Investment Singapore 20 20Orix Leasing Singapore Limited Leasing/rental Singapore 20 20OSK-UOB Unit Trust Management Berhad Investment management Malaysia 30 30OUB Manulife Pte Ltd Life insurance Singapore – 50

# OUB Optimix Funds Management Limited Unit trust fund management Singapore – 50Overseas Union Insurance, Limited General insurance Singapore 50 48PT Bali Walden UOB Venture Capital Venture capital

(under voluntary liquidation) investment Indonesia 20 20Singapore Consortium Investment Unit trust

Management Ltd fund management Singapore 33 40Tower-Ed Sdn Bhd General and life insurance Malaysia 49 –

# UOB Investment Consultancy (Beijing) Limited[formerly known as UOB Centek Technology Consultancy and People’s Republic(Beijing) Investment Consulting Co., Ltd] research services of China – 50

UOB Venture Investments Limited Venture capital investment Singapore 21 21Vertex Asia Limited Investment Singapore 21 21Walden Asia II Limited Venture capital investment United States

of America 25 25

Notes:

* The Group’s interest in this company was divested during the year [Note 19(c)] and the investment has accordingly been classified in investment securities

(Note 30).# This company was a subsidiary at 31 December 2002 (see Note 46).

48 Authorisation of Financial StatementsOn 28 February 2003, the Board of Directors of United Overseas Bank Limited authorised these financial statements for issue.

The Auditors’ Report is on page 90.


Investor Reference

Financial Highlights 7

Group Financial Review 62

Subsidiaries 162

Major Associates 168

11-Year Group Financial Summary (S$ & US$) 170

11-Year Bank Financial Summary (S$ & US$) 172

UOB Share Price and Turnover 174

Statistics of Shareholdings 175

Changes in Share Capital 177

Notice of Annual General Meeting 184

United fo r Growth

170

2002 2001 2000 1999

(Figures in millions of Singapore dollars)

Net Profit After Tax+* 1,064.2 924.6 912.9 760.2Dividends** 720.4++ 425.6 316.3 416.1##

Cash, placements, balances with bankers and agents,including government treasury bills and securities* 33,853.7 39,285.5 31,221.7 24,681.1

Investments, including associates+* 5,219.7 5,212.4 2,016.6 1,681.2Loans (advances & trade bills) 58,884.0 60,892.1 30,045.3 27,259.1Fixed and other assets* 5,846.0 4,721.4 3,040.5 3,152.5Goodwill 3,666.0 3,776.7 – –

Total Assets 107,469.4 113,888.1 66,324.1 56,773.9

Represented by:Deposits 87,220.6 92,545.5 56,836.9 47,207.0Bills and drafts payable, and other liabilities* 5,449.4 4,468.6 2,519.0 3,375.9Debentures, certificates of deposit, unsecured loan

stock and bonds – – – –Debts issued 2,146.8 4,157.2 – –Shareholders’ funds+* 12,652.6 12,716.8 6,968.2 6,191.0

Total Liabilities and Shareholders’ Funds 107,469.4 113,888.1 66,324.1 56,773.9

(Figures in millions of United States dollars)

Net Profit After Tax+* 613.1 499.5 527.1 456.2Dividends** 415.0++ 229.9 182.7 249.7##

Cash, placements, balances with bankers and agents,including government treasury bills and securities* 19,502.1 21,223.9 18,026.4 14,810.1

Investments, including associates+* 3,006.9 2,816.0 1,164.3 1,008.8Loans (advances & trade bills) 33,921.3 32,896.9 17,347.2 16,357.1Fixed and other assets* 3,367.7 2,550.7 1,755.5 1,891.7Goodwill 2,111.9 2,040.4 – –

Total Assets 61,909.9 61,527.9 38,293.4 34,067.7

Represented by:Deposits 50,245.2 49,997.6 32,815.8 28,327.0Bills and drafts payable, and other liabilities* 3,139.2 2,414.2 1,454.4 2,025.7Debentures, certificates of deposit, unsecured loan

stock and bonds – – – –Debts issued 1,236.7 2,245.9 – –Shareholders’ funds+* 7,288.8 6,870.2 4,023.2 3,715.0


Exchange Conversion of US$1.00 S$1.7359 S$1.8510 S$1.7320 S$1.6665

11-Year Group Financial Summary

* Figures/balances prior to 2000 do not take into account the impact of adopting Singapore Statement of Accounting Standard (SAS) 10: Events After Balance SheetDate. Figures/balances prior to 2001 do not take into account the impact of adopting revised SAS 12: Income Taxes and Interpretation of SAS (INT) 5: Consolidation– Special Purpose Entities.

+ Figures/balances prior to 1998 do not take into account the effects of equity accounting.# Excludes extraordinary item of $31,207,000 (US$21,367,000).

** Based on total interim dividend paid and proposed final dividend during the year.++ Includes interim dividend of 18.76% less 22% income tax amounting to $230,020,000 (US$132,508,000), paid in specie of shares in Haw Par Corporation Limited.## Includes special tax exempt bonus dividend of 25% amounting to $262,966,000 (US$157,795,000).

*** Includes special tax exempt bonus dividend of 22% amounting to $164,768,000 (US$112,816,000).+++ Includes special bonus dividend of 10% less 27% income tax amounting to $48,406,000 (US$30,094,000).


1998 1997 1996 1995 1994 1993 1992


331.7 502.0 715.5 632.7 570.1# 456.6 300.8132.5 132.5 123.8 123.1 262.9*** 131.2+++ 74.2

19,608.9 16,306.6 14,908.1 13,743.8 13,337.3 11,870.1 10,963.61,573.8 1,131.6 1,268.4 1,071.3 891.2 853.6 713.4

27,653.4 29,769.8 27,459.3 23,758.4 21,379.6 18,469.5 14,717.71,953.1 2,153.6 2,171.0 1,991.9 1,743.3 3,028.9 1,481.0

– – – – – – –

50,789.2 49,361.6 45,806.8 40,565.4 37,351.4 34,222.1 27,875.7

42,597.7 41,587.8 38,218.8 33,758.6 31,255.2 27,654.7 23,063.22,313.0 2,446.7 2,481.9 2,385.6 2,218.7 3,154.6 1,788.2

– – 199.5 197.8 196.2 372.3 371.0– – – – – – –

5,878.5 5,327.1 4,906.6 4,223.4 3,681.3 3,040.5 2,653.3

50,789.2 49,361.6 45,806.8 40,565.4 37,351.4 34,222.1 27,875.7


199.8 299.4 511.3 447.0 390.4# 283.9 183.279.8 79.0 88.5 87.0 180.0*** 81.5+++ 45.2

11,809.0 9,726.6 10,652.4 9,709.5 9,132.0 7,379.6 6,677.0947.8 675.0 906.3 756.9 610.2 530.7 434.4

16,653.7 17,757.1 19,620.8 16,784.4 14,638.6 11,482.4 8,963.31,176.2 1,284.6 1,551.3 1,407.2 1,193.6 1,883.1 902.0

– – – – – – –

30,586.7 29,443.3 32,730.8 28,658.0 25,574.4 21,275.8 16,976.7

25,653.5 24,806.3 27,308.8 23,849.2 21,400.3 17,192.9 14,045.81,393.0 1,459.5 1,773.4 1,685.3 1,519.1 1,961.2 1,089.0

– – 142.6 139.8 134.4 231.5 226.0– – – – – – –

3,540.2 3,177.5 3,506.0 2,983.7 2,520.6 1,890.2 1,615.9

30,586.7 29,443.3 32,730.8 28,658.0 25,574.4 21,275.8 16,976.7

S$1.6605 S$1.6765 S$1.3995 S$1.4155 S$1.4605 S$1.6085 S$1.6420

172

2002 2001 2000 1999


Net Profit After Tax* 1,432.0 746.6 710.1 541.5#

Dividends** 720.4++ 425.6 316.3 416.1##

Cash, placements, balances with bankers and agents,including group companies, government treasury billsand securities 30,693.8 27,236.6 26,051.0 19,680.2

Investments, including subsidiaries and associates 4,803.7 11,987.9 2,232.9 2,654.0Loans (advances & trade bills) 49,956.2 23,495.8 23,494.3 20,686.0Fixed and other assets* 4,186.5 2,273.0 1,713.9 1,559.1Goodwill 3,585.5 – – –

Total Assets 93,225.7 64,993.3 53,492.1 44,579.3

Represented by:Deposits 77,319.6 49,047.9 46,718.0 38,141.5Bills and drafts payable, and other liabilities* 3,327.6 1,723.8 1,613.4 1,810.0Debentures, certificates of deposit, unsecured loan stock

and bonds – – – –Debts issued 1,294.4 3,639.1 – –Shareholders’ funds* 11,284.1 10,582.5 5,160.7 4,627.8



Net Profit After Tax* 824.9 403.3 410.0 324.9#

Dividends** 415.0++ 229.9 182.7 249.7##

Cash, placements, balances with bankers and agents,including group companies, government treasury billsand securities 17,681.8 14,714.5 15,041.0 11,809.3

Investments, including subsidiaries and associates 2,767.2 6,476.4 1,289.2 1,592.6Loans (advances & trade bills) 28,778.3 12,693.6 13,564.8 12,412.8Fixed and other assets* 2,411.7 1,228.0 989.5 935.6Goodwill 2,065.5 – – –

Total Assets 53,704.5 35,112.5 30,884.5 26,750.3

Represented by:Deposits 44,541.5 26,498.0 26,973.4 22,887.2Bills and drafts payable, and other liabilities* 1,916.9 931.3 931.5 1,086.1Debentures, certificates of deposit, unsecured loan stock

and bonds – – – –Debts issued 745.7 1,966.0 – –Shareholders’ funds* 6,500.4 5,717.2 2,979.6 2,777.0


Exchange Conversion of US$1.00 S$1.7359 S$1.8510 S$1.7320 S$1.6665

11-Year Bank Financial Summary

* Figures/balances prior to 2000 do not take into account the impact of adopting revised Singapore Statements of Accounting Standard (SAS) 8 and 10. Figures/balances prior to 2001 do not take into account the impact of adopting revised SAS 12.

# Excludes extraordinary items of $280,035,000 (US$191,739,000) in 1994 and $772,791,000 (US$463,721,000) in 1999.** Based on total interim dividend paid and proposed final dividend during the year.++ Includes interim dividend of 18.76% less 22% income tax amounting to $230,020,000 (US$132,508,000), paid in specie of shares in Haw Par Corporation Limited.## Includes special tax exempt bonus dividend of 25% amounting to $262,966,000 (US$157,795,000).

*** Includes special tax exempt bonus dividend of 22% amounting to $164,768,000 (US$112,816,000).+++ Includes special bonus dividend of 10% less 27% income tax amounting to $48,406,000 (US$30,094,000).


1998 1997 1996 1995 1994 1993 1992


229.9 270.2 415.8 382.6 291.0# 232.5 169.2132.5 132.5 123.8 123.1 262.9*** 131.2+++ 74.2

16,259.0 13,327.5 11,598.5 11,058.4 11,215.1 9,464.4 8,952.01,877.9 1,772.4 1,912.8 1,723.3 1,588.6 1,451.0 1,155.6

18,729.2 19,513.0 17,340.6 14,609.5 12,922.3 10,619.0 8,249.91,086.3 1,168.2 1,309.9 1,119.9 1,058.5 874.1 796.1

– – – – – – –

37,952.4 35,781.1 32,161.8 28,511.1 26,784.5 22,408.5 19,153.6

33,036.4 30,978.5 27,486.0 24,317.8 22,825.2 19,049.7 16,209.71,056.1 1,045.2 1,033.2 939.6 1,011.5 874.5 713.2

– – 199.4 197.8 196.2 362.8 361.4– – – – – – –

3,859.9 3,757.4 3,443.2 3,055.9 2,751.6 2,121.5 1,869.3

37,952.4 35,781.1 32,161.8 28,511.1 26,784.5 22,408.5 19,153.6


138.5 161.2 297.1 270.0 199.2# 144.5 103.079.8 79.0 88.5 87.0 180.0*** 81.5+++ 45.2

9,791.6 7,949.6 8,287.6 7,812.3 7,678.8 5,884.0 5,451.91,130.9 1,057.2 1,366.8 1,217.5 1,087.7 902.1 703.8

11,279.3 11,639.1 12,390.5 10,321.0 8,847.9 6,601.8 5,024.3654.2 696.8 936.0 791.2 724.8 543.4 484.8

– – – – – – –

22,856.0 21,342.7 22,980.9 20,142.0 18,339.2 13,931.3 11,664.8

19,895.5 18,478.1 19,639.8 17,179.6 15,628.3 11,843.1 9,871.9636.0 623.4 738.3 663.8 692.6 543.7 434.3

– – 142.5 139.7 134.3 225.5 220.1– – – – – – –

2,324.5 2,241.2 2,460.3 2,158.9 1,884.0 1,319.0 1,138.5

22,856.0 21,342.7 22,980.9 20,142.0 18,339.2 13,931.3 11,664.8

S$1.6605 S$1.6765 S$1.3995 S$1.4155 S$1.4605 S$1.6085 S$1.6420

174

Share Price+ 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Highest ($) 4.54 8.51 9.08 9.19 9.19 9.38 7.86 15.30 15.40 14.20 15.30Lowest ($) 4.01 4.34 6.66 7.72 7.86 6.77 2.78 5.97 9.40 8.50 11.20Average ($) 4.28 6.43 7.87 8.46 8.53 8.08 5.32 10.64 12.40 11.35 13.25Last Done ($) 4.51 8.51 8.76 8.71 8.05 7.91 6.20 14.70 13.00 12.70 11.80

Ratios

Dividend Cover (no. of times) 4.05 5.52 # 5.81 # 5.14 5.78 3.79 2.50 4.96 # 2.89 2.17 2.17 #

Adjusted Net Asset Value Per Share ($)* 3.25 3.63 3.89 4.40 4.96 5.09 5.62 5.89 6.62 8.09 8.05Adjusted Earnings Per Share ($)** 0.31 0.52 0.62 0.66 0.74 0.49 0.32 0.72 0.87 0.77 0.68Dividends Per Share (cents) – Taxable 18.00 28.00 18.00 18.00 18.00 18.00 18.00 20.00 40.00 40.00 58.76 ##

– Tax Exempt – – 22.00 – – – – 25.00 – – –Net Dividend Yield (%)++ 3.01 3.18 4.47 1.57 1.56 1.65 2.50 3.75 2.42 2.75 3.46Price Earning Ratio++ 13.81 12.37 12.69 12.82 11.53 16.49 16.63 14.78 14.25 14.74 19.49

# Dividend cover is 3.48 times for 1993 if the special bonus dividend of 10% less 27% income tax is included, 2.17 times (excluding extraordinary items) for 1994 if the special taxexempt bonus dividend of 22% is included, 1.83 times for 1999 if the special tax exempt bonus dividend of 25% is included, and 1.48 times for 2002 if the interim dividend in specieof 18.76% is included.

## Includes interim dividend of 18.76%, paid in specie of shares in Haw Par Corporation Limited.* Net asset value per share has been adjusted for bonus issues in 1993, 1995 and 1999, for impact of adopting Singapore Statement of Accounting Standard (SAS) 10: Events After

Balance Sheet Date with effect from 2000, and for impact of adopting revised SAS 12: Income Taxes and Interpretation of SAS (INT) 5: Consolidation – Special Purpose Entities witheffect from 2001.

** Earnings per share has been adjusted for bonus issues in 1993, 1995 and 1999, and rights issue in 1994.+ Share prices have been adjusted for bonus and/or rights issues.

++ Adjusted average share prices have been used in computing net dividend yield and price earning ratio.

Notes: (1) On 15 November 1999, UOB’s local and foreign share counters were merged and commenced trading on the Singapore Exchange as a single counter.(2) Share prices and turnover reflect transactions recorded on the Singapore Exchange.

UOB Share Price and Turnover

92000

88000

84000

80000

76000

72000

68000

64000

60000

56000

52000

48000

44000

40000

36000

32000

28000

24000

20000

16000

12000

8000

4000

Monthly Turnover (’000)$ Per Share

23

22

21

20

19

18

17

16

15

14

13

12

11

10

9

8

7

6

5

4

3

2

1

Monthly Turnover (’000) $ Per Share

20022000 20011998199719961995199419931992 1999


Statistics of Shareholdingsas at 17 March 2003

No. of Percentage of No. of PercentageSize of Shareholdings Shareholders Shareholders Shares of Shares

1 – 999 8,763 28.14 2,650,585 0.171,000 – 10,000 19,333 62.07 51,415,199 3.2710,001 – 1,000,000 2,982 9.57 138,638,021 8.821,000,001 & Above 68 0.22 1,378,898,820 87.74

31,146 100.00 1,571,602,625 100.00

Public FloatRule 723 of the Listing Manual of the Singapore Exchange Securities Trading Limited requires that at least 10% of theequity securities (excluding preference shares and convertible equity securities) of a listed company in a class that is listed isat all times held by the public.

Based on information available to the Company as at 17 March 2003, approximately 79% of the issued ordinary shares ofthe Company was held by the public and therefore, Rule 723 of the Listing Manual has been complied with.

PercentageTwenty Largest Shareholders No. of Shares of Shares

DBS Nominees Pte Ltd 257,408,200 16.38Raffles Nominees Pte Ltd 189,525,264 12.06United Overseas Bank Nominees (Private) Limited 184,987,287 11.77Wee Investments Private Ltd 110,909,184 7.06HSBC (Singapore) Nominees Pte Ltd 102,133,952 6.50Citibank Nominees Singapore Pte Ltd 94,992,074 6.04Tai Tak Estates Sdn Bhd 67,445,739 4.29Wah Hin & Company (Pte) Ltd 65,621,771 4.18Overseas Union Enterprise Limited 48,337,728 3.08DB Nominees (S) Pte Ltd 46,704,284 2.97C Y Wee & Co Pte Ltd 31,645,653 2.01Overseas Union Bank Nominees (Private) Limited 17,100,054 1.09Wee Cho Yaw 16,390,248 1.04Oversea-Chinese Bank Nominees Private Limited 13,975,215 0.89Tee Teh Sdn Berhad 9,526,954 0.61Kwan Tee Holdings Pte Ltd 9,112,892 0.58Ho Sim Guan 5,565,142 0.35Overseas Union Insurance, Limited – Offshore Insurance Fund 5,425,760 0.35Chew How Teck And Company (Pte) Limited 5,051,455 0.32Morgan Stanley Asia (Singapore) Securities Pte Ltd 4,856,972 0.31

1,286,715,828 81.88

176

Statistics of Shareholdingsas at 17 March 2003

OtherShareholdings

Shareholdings in whichRegistered in Substantialthe Name of Shareholders are

Substantial Deemed to haveShareholders an Interest Total Interest

PercentageSubstantial Shareholders No. of Shares No. of Shares No. of Shares of Shares

Lien Ying Chow 316,516 81,321,554 * 81,638,070 5.19Lien Ying Chow (Pte) Ltd – 81,221,771 * 81,221,771 5.17Wah Hin & Company (Pte) Ltd 65,621,771 15,600,000 81,221,771 5.17Wee Cho Yaw 16,390,248 206,509,557 ** 222,899,805 14.18Wee Ee Cheong 2,794,899 143,951,011 ** 146,745,910 9.34Wee Ee Chao 141,164 114,602,696 ** 114,743,860 7.30Wee Ee Lim 1,606,834 143,933,758 ** 145,540,592 9.26Wee Investments Private Ltd 110,909,021 571,021 111,480,042 7.09

* Lien Ying Chow and Lien Ying Chow (Pte) Ltd are each deemed to have an interest in 81,221,771 shares held by Wah Hin & Company (Pte) Ltd.

** Wee Cho Yaw, Wee Ee Cheong, Wee Ee Chao and Wee Ee Lim are each deemed to have an interest in 111,480,042 shares held by Wee Investments Private Ltd.


The following table sets out the changes in the issued share capital of the Bank from 11 July 1970 (when a public quotation wasfirst obtained for the Bank's ordinary shares) to 31 December 2002:

Resultant Resultant ResultantNo. of Total Total No. Total No.

Ordinary Issued Share No. of of Issued of IssuedShares Capital Warrants Warrants Warrants

Date Issued Source of Increase ($) Converted 1994 1997

11-7-1970 2,500,000 Public Issue at par 25,000,000 – – –6-4-1972 5,000,000 Bonus Issue of 1 for 5 30,000,000 – – –

29-4-1972 5,000,000 Rights Issue of 1 for 5 at par 35,000,000 – – –17-12-1972 3,000,000 Placement in Hong Kong 38,000,000 – – –

12-4-1973 1,401,405 Acquisition of 54.6% of Lee Wah Bank Limited 39,401,405 – – –

23-5-1973 39,401,405 Rights Issue of 1 for 1 at par 78,802,810 – – –30-7-1973 8,073,080 Acquisition of further 28.7% of Chung

& 31-8-1973 Khiaw Bank Limited and remaining 45.4% of Lee Wah Bank Limited 86,875,890 – – –

21-8-1975 21,718,973 Rights Issue of 1 for 4 at $2.50 per share 108,594,863 – – –13-11-1976 10,859,487 Bonus Issue of 1 for 10 119,454,350 – – –13-12-1976 36,198,288 Rights Issue of 1 for 3 at $3.00 per share 155,652,638 – – –

12-5-1978 15,565,264 Bonus Issue of 1 for 10 171,217,902 – – –24-1-1979 4,362,950 Share exchange pursuant to a takeover

offer made to the shareholders of Singapore Finance Limited 175,580,852 – – –

27-2-1979 111,500 Share exchange pursuant to a takeover offer made to the shareholders of Singapore Finance Limited 175,692,352 – – –

19-10-1979 17,569,236 Bonus Issue of 1 for 10 193,261,588 – – –12-5-1980 19,326,159 Bonus Issue of 1 for 10 212,587,747 – – –6-11-1980 42,517,550 Rights Issue of 1 for 5 at $3.00 per share 255,105,297 – – –

12-12-1980 7,889,399 Conversion of Bonds 262,994,696 – – –to 12-8-1981

12-10-1981 65,748,674 Bonus Issue of 1 for 4 328,743,370 – – –26-11-1981 65,748,674 Rights Issue of 1 for 4 at $3.00 per share 394,492,044 – – –

17-8-1987 38,156,025 Share exchange pursuant to a takeoverto 22-10-1987 offer made to the shareholders of

Industrial & Commercial Bank Limited 432,648,069 – – –20-2-1988 15,230,903 Share exchange issued to

Chung Khiaw Bank Limited shareholders pursuant to the scheme of arrangement dated 21 December 1987 447,878,972 – – –

27-5-1989 55,984,871 Bonus Issue of 1 for 8 503,863,843 – – –6-12-1989 – Warrants issued in connection with the

1.5% Unsecured Loan Stock 1989/1994 503,863,843 – 41,988,653 –30-12-1989 16,211 Exercise of Warrants 1994 503,880,054 16,211 41,972,442 –

13-1-1990 470,963 Exercise of Warrants 1994 504,351,017 470,963 41,501,479 –to 15-5-1990

28-5-1990 50,435,102 Bonus Issue of 1 for 10 554,786,119 – 41,501,479 –8-6-1990 2,870,183 Exercise of Warrants 1994 557,656,302 2,870,183 38,631,296 –

to 31-12-199015-1-1991 2,101,829 Exercise of Warrants 1994 559,758,131 2,101,829 36,529,467 –

to 31-12-1991 308,000 Exercise of Executives’ Share Options 560,066,131 – 36,529,467 –15-1-1992 12,805,838 Exercise of Warrants 1994 572,871,969 12,805,838 23,723,629 –

to 26-6-1992 427,000 Exercise of Executives’ Share Options 573,298,969 – 23,723,629 –

Changes in Share Capital

178

Resultant Resultant ResultantNo. of Total Total No. Total No.

Ordinary Issued Share No. of of Issued of IssuedShares Capital Warrants Warrants Warrants

Date Issued Source of Increase ($) Converted 1994 1997

26-6-1992 – Warrants issued in connection with the 5% Unsecured Bond 1992/1997 573,298,969 – 23,723,629 71,542,884

17-7-1992 893,597 Exercise of Warrants 1994 574,192,566 893,597 22,830,032 71,542,884to 31-12-1992 808,926 Exercise of Warrants 1997 575,001,492 808,926 22,830,032 70,733,958

33,000 Exercise of Executives’ Share Options 575,034,492 – 22,830,032 70,733,95821-1-1993 8,530,904 Exercise of Warrants 1994 583,565,396 8,530,904 14,299,128 70,733,958

to 17-9-1993 550,762 Exercise of Warrants 1997 584,116,158 550,762 14,299,128 70,183,1963,321,000 Exercise of Executives’ Share Options 587,437,158 – 14,299,128 70,183,196

28-9-1993 73,429,644 Bonus Issue of 1 for 8 660,866,802 – – 78,956,0955-10-1993 1,891,445 Exercise of Warrants 1994 662,758,247 1,891,445 12,407,683 78,956,095

to 31-12-1993 181,105 Exercise of Warrants 1997 662,939,352 181,105 12,407,683 78,774,990147,000 Exercise of Executives’ Share Options 663,086,352 – 12,407,683 78,774,990

13-1-1994 3,100,493 Exercise of Warrants 1994 666,186,845 3,100,493 9,307,190 78,774,990to 9-6-1994 1,460,531 Exercise of Warrants 1997 667,647,376 1,460,531 9,307,190 77,314,459

1,654,000 Exercise of Executives’ Share Options 669,301,376 – 9,307,190 77,314,45928-6-1994 66,915,064 Rights Issue of 1 for 10 at $3.50 per share

(local) and $4.12 per share (foreign) 736,216,440 – 9,307,190 82,034,97930-6-1994 8,952,267 Exercise of Warrants 1994 745,168,707 8,952,267 354,923 82,034,979

to 31-12-1994 3,612,759 Exercise of Warrants 1997 748,781,466 3,612,759 – 78,422,220166,000 Exercise of Executives’ Share Options 748,947,466 – – 78,422,220

16-1-1995 9,027,269 Exercise of Warrants 1997 757,974,735 9,027,269 – 69,394,951to 12-5-1995 1,497,000 Exercise of Executives’ Share Options 759,471,735 – – 69,394,951

3-6-1995 151,894,347 Bonus Issue of 1 for 5 911,366,082 – – 83,273,9413-7-1995 247,950 Exercise of Warrants 1997 911,614,032 247,950 – 83,025,991

to 29-12-1995 44,000 Exercise of Executives’ Share Options 911,658,032 – – 83,025,991 15-1-1996 28,081,987 Exercise of Warrants 1997 939,740,019 28,081,987 – 54,944,004

to 31-12-1996 326,000 Exercise of Executives’ Share Options 940,066,019 – – 54,944,00416-1-1997 54,465,975 Exercise of Warrants 1997 994,531,994 54,465,975 – 478,029

to 29-12-1997 171,000 Exercise of Executives’ Share Options 994,702,994 – – –1-1-1998 33,000 Exercise of Executives’ Share Options 994,735,994 – – –

to 15-1-19981-1-1999 4,625,000 Exercise of Executives’ Share Options 999,360,994 – – –

to 11-11-199912-11-1999 52,322,837 Bonus Issue of 50 for 1,000 local shares

and 56 for 1,000 foreign shares 1,051,683,831 – – –13-11-1999 178,000 Exercise of Executives’ Share Options 1,051,861,831 – – –

to 31-12-19994-1-2000 589,000 Exercise of Executives’ Share Options 1,052,450,831 – – –


to 6-9-200120-9-2001 518,280,794 Acquisition of 100% of

to 26-10-2001 Overseas Union Bank Limited 1,571,097,625 – – –7-12-2001 11,000 Exercise of Executives’ Share Options 1,571,108,625 – – –


to 31-12-2002

Changes in Share Capital


Banking Services

Singapore

United Overseas Bank Limited80 Raffles PlaceUOB PlazaSingapore 048624Telephone: (65) 6533 9898Facsimile: (65) 6534 2334Telex: RS 21539 TYEHUASWIFT: UOVBSGSGWebsite: www.uobgroup.com

United Overseas Bank Limited has59 branches in Singapore(including 2 OUB branches).

Far Eastern Bank Limited(a subsidiary)156 Cecil Street, #01-00Far Eastern Bank BuildingSingapore 069544Telephone: (65) 6221 9055Facsimile: (65) 6224 2263Telex: RS 23029 FEBANKWebsite: www.uobgroup.com

Far Eastern Bank Limited has3 branches in Singapore.

Australia

UOB Sydney BranchUnited Overseas Bank BuildingLevel 9, 32 Martin PlaceSydney, NSW 2000Telephone: (61)(2) 9221 1924Facsimile: (61)(2) 9221 1541Telex: AA 73507 TYHUASWIFT: UOVBAU2SEmail: [email protected] Head, Australia &New Zealand: Peter MackinlayGeneral Manager: Kevin Yung Kin Man

Brunei

UOB Bandar Seri Begawan BranchRBA Plaza, Unit G5Jalan SultanBandar Seri Begawan BS8811Telephone: (673)(2) 225 477/222 210/220 380Facsimile: (673)(2) 240 792Cable: OVERSUNION BSBTelex: OUB BU 2256Email: [email protected] Manager: Sia Kee Heng

UOB Kuala Belait BranchChinese Chamber of CommerceBuildingGround FloorLot 104, Jalan Bunga RayaKuala Belait KA1131Telephone: (673)(3) 331 889/341 012Facsimile: (673)(3) 331 391Email: [email protected] Manager: Monica Suharju (Mrs)

Canada

UOB Vancouver BranchVancouver Centre, Suite 310650 West Georgia StreetP O Box 11616Vancouver, British ColumbiaCanada V6B 4N9Telephone: (1)(604) 662 7055Facsimile: (1)(604) 662 3356Telex: 04-507520 TYEHUA VCREmail: [email protected] Manager: Koh Kok Jin

China

UOB Beijing Branch2513, China World Trade CentreTower 2No. 1 Jian Guo Men Wai AvenueBeijing 100004Telephone: (86)(10) 6505 1863Facsimile: (86)(10) 6505 1862Email: [email protected] Manager:Anthony Liau Guan Siang

UOB Guangzhou BranchGuangzhou Aether Square, Unit 205986 Jie Fang Bei RoadGuangdong ProvinceGuangzhou 510040Telephone: (86)(20) 8667 6029Facsimile: (86)(20) 8667 0779Telex: 440931 UOBGZ CNEmail: [email protected] Manager: Freddy Lim Ah Tee

UOB Shanghai Branch2201 Jin Mao Tower88 Century BoulevardPudong New AreaShanghai 200121Telephone: (86)(21) 5047 3688Facsimile: (86)(21) 5047 8688Telex: 33170 UOBSH CNSWIFT: UOVBCN22SHBEmail: [email protected] Manager: Oh Eng Lock

UOB Shenzhen BranchDi Wang Commercial CentreShun Hing SquareUnit 2, G2 Floor5002 Shennan Road EastShenzhen 518008Telephone: (86)(755) 8246 1298Facsimile: (86)(755) 8246 3326Telex: 420385 OUB SZ CNEmail: [email protected] Manager: Lim Tow Meng

Our International Network

180

UOB Xiamen BranchUnited Overseas Bank BuildingUnit 01-0119 Hubin Bei RoadXiamen 361012Telephone: (86)(592) 508 1601/2/3/4Facsimile: (86)(592) 508 1605Telex: 923079 UOBXM CNEmail: [email protected] Manager: Soh Ek Chor

UOB Chengdu Representative OfficeHoliday Inn Crowne Plaza, Room 40531 Zong Fu StreetChengduSichuan 610016Telephone: (86)(28) 8674 8618Facsimile: (86)(28) 8674 8638Chief Representative:John Ang Wee Pheng

Hong Kong S.A.R.

UOB Central BranchGround Floor54-58 Des Voeux RoadCentralTelephone: (852) 2842 5666Facsimile: (852) 2537 7890Telex: 74581 TYHUA HXSWIFT: UOVBHKHHEmail: [email protected] Executive Officer:Robert Chan Tze LeungDeputy Chief Executive Officer:Chow Yew Hon

UOB Hong Kong Main BranchEdinburgh Tower, 5/F15 Queen's RoadCentralTelephone: (852) 2521 1521/2910 8888Facsimile: (852) 2810 5506Telex: 74581 TYHUA HXSWIFT: UOVBHKHHEmail: [email protected] Executive Officer:Robert Chan Tze LeungDeputy Chief Executive Officer:Chow Yew Hon

UOB Landmark BranchGloucester TowerSuite 2504-2506, 25/FThe Landmark11 Pedder StreetCentralTelephone: (852) 2532 6888Facsimile: (852) 2530 9666Email: [email protected] Executive Officer:Robert Chan Tze LeungDeputy Chief Executive Officer:Chow Yew Hon

UOB Mongkok Branch794 Nathan RoadGround FloorKowloonTelephone: (852) 2381 2292Facsimile: (852) 2397 4564Email: [email protected] Executive Officer:Robert Chan Tze LeungDeputy Chief Executive Officer:Chow Yew Hon

UOB Sheung Wan BranchCosco TowerUnits 1607-1614, 16/F183 Queen's RoadCentralTelephone: (852) 2910 8833Facsimile: (852) 2810 5773/2537 7653Email: [email protected] Executive Officer:Robert Chan Tze LeungDeputy Chief Executive Officer:Chow Yew Hon

Indonesia

UOB Jakarta Representative OfficeMenara BCD, 2nd FloorJalan Jend. Sudirman Kav. 26Jakarta 12920Telephone: (62)(21) 250 6382Facsimile: (62)(21) 250 6379Chief Representative:Utami Dewi Suhadi (Ms)

PT Bank UOB Indonesia(a subsidiary)Menara BCD, 1st-3rd FloorJalan Jend. Sudirman Kav. 26Jakarta 12920Telephone: (62)(21) 250 6330Facsimile: (62)(21) 250 6331Telex: 60418 UOB IASWIFT: UOBBIDJAEmail: [email protected] Director: Chua Kim HayDeputy President Director:James Lim Tian Pher

PT Bank UOB Indonesia has8 branches in Indonesia.

Japan

UOB Tokyo BranchShin Kokusai Building, 3-4-1Marunouchi, Chiyoda-kuTokyo 100-0005Telephone: (81)(3) 3216 4251Facsimile: (81)(3) 3216 4254Cable: TYEHUABANKTelex: J22178 TYEHUA JSWIFT: UOVBJPJTEmail: [email protected] Manager: Seah Kok Thye

Malaysia

UOB Labuan BranchLevel 6A, Main Office TowerFinancial Park Labuan ComplexJalan Merdeka87000 Labuan F TTelephone: (60)(87) 424 388Facsimile: (60)(87) 424 389Telex: MA 85096 TYEHUAEmail: [email protected] Manager: Ho Fong Kun (Ms)



United Overseas Bank(Malaysia) Bhd(a wholly-owned subsidiary)Menara UOBJalan Raja LautP O Box 1121250738 Kuala LumpurTelephone: (60)(3) 2692 7722Facsimile: (60)(3) 2691 0281Cable: BANKUOBM KUALA LUMPURTelex: UOBMMP MA 31877SWIFT: UOVBMYKLEmail: [email protected] Director & Chief Executive:Francis Lee Chin Yong

United Overseas Bank (Malaysia) Bhdhas 37 branches in Malaysia.

Myanmar

UOB Yangon Representative Office48 Aung Teza Street, 6th WardHigh Land AvenueMayangone TownshipYangonTelephone: (95)(1) 667 818Facsimile: (95)(1) 544 126Email: [email protected]: U Hla Thaung

Philippines

United Overseas Bank Philippines(a subsidiary)Pacific Star Building17th FloorSen. Gil Puyat corner Makati AvenueMakati CityTelephone: (63)(2) 878 8686Facsimile: (63)(2) 811 5917SWIFT: UOVBPHMMEmail: [email protected] & Chief Executive Officer:Chua Teng HuiDeputy President & Deputy ChiefExecutive Officer: Wang Lian Khee

United Overseas Bank Philippines has67 branches in the Philippines.

South Korea

UOB Seoul BranchSuite 1508, Kyobo Building 1, 1-KaChongro, Chongro-kuSeoul 110-714Telephone: (82)(2) 739 3916/9Facsimile: (82)(2) 730 9570Telex: K28978 TYEHUAEmail: [email protected] Manager: Liew Chan Harn

Taiwan

UOB Taipei BranchUnion Enterprise Plaza, 10th Floor109 Minsheng East RoadSection 3Taipei 105Telephone: (886)(2) 2715 0125Facsimile: (886)(2) 2713 7456Telex: 26147 TYEHUAEmail: [email protected] Manager: Teh Wee Jin

Thailand

UOB Bangkok InternationalBanking FacilityUOB Radanasin Bank Building10th Floor690 Sukhumvit RoadKlongton, KlongtoeyBangkok 10110Telephone: (66)(2) 259 6220/1Facsimile: (66)(2) 259 4470Email: [email protected] Manager:Dr Ratsuvon Pidpayon

UOB Radanasin Bank PublicCompany Limited(a subsidiary)UOB Radanasin Bank Building690 Sukhumvit RoadKlongton, KlongtoeyBangkok 10110Telephone: (66)(2) 260 0090 to 119Facsimile: (66)(2) 260 5310/1Telex: 20820 UOBRTHSWIFT: RSBXTHBKWebsite: www.uob-radanasin.co.thChief Executive Officer: Gan Hui Beng

UOB Radanasin Bank Public CompanyLimited has 36 branches in Thailand.

United Kingdom

UOB London Branch19 Great Winchester StreetLondon EC2N 2BHTelephone: (44)(207) 628 3504Facsimile: (44)(207) 628 3433Cable: TYEHUABANKTelex: 8954292 TYEHUA GSWIFT: UOVBGB2LEmail: [email protected] Manager:George Lim Phoon Seng

United States of America

UOB New York AgencyUOB Building592 Fifth Avenue10th Floor, 48th StreetNew York, NY 10036Telephone: (1)(212) 382 0088Facsimile: (1)(212) 382 1881Cable: TYEHUABANK NEW YORKTelex: 232265 TYEHUASWIFT: UOVBUS33Email: [email protected] & General Manager:Wong Kwong Yew

182

UOB Los Angeles Agency911 Wilshire BoulevardGround Floor, Los AngelesCalifornia 90017-3478Telephone: (1)(213) 623 8042Facsimile: (1)(213) 623 3412Cable: TYHUABANK LOS ANGELESTelex: 6831011 TYHUAEmail: [email protected] & General Manager:Chen Hoong

Vietnam

UOB Ho Chi Minh City BranchCentral Plaza Office BuildingGround Floor17 Le Duan BoulevardDistrict 1Ho Chi Minh CityTelephone: (84)(8) 825 1424Facsimile: (84)(8) 825 1423Telex: 813221 UOBHCM VTSWIFT: UOVBVNVXEmail: [email protected] Manager: Thng Tien Tat

Correspondents

In all principal cities of the world

Related Financial Services

Gold/Futures Dealing

Singapore

UOB Bullion and Futures Limited(a wholly-owned subsidiary)80 Raffles Place, 5th StoreyUOB Plaza 1Singapore 048624Telephone: (65) 6539 2929/6535 7122Facsimile: (65) 6538 3990Email: [email protected] Director & Chief ExecutiveOfficer: Wong Chong Fatt

Taiwan

UOB Bullion and Futures Limited,Taiwan BranchUnion Enterprise Plaza, 10th Floor109 Minsheng East RoadSection 3Taipei 105Telephone: (886)(2) 2545 6163Facsimile: (886)(2) 2719 9434Email: [email protected]: Vincent Cheng Chih Jung

Insurance

Singapore

United Overseas Insurance Limited(a subsidiary)156 Cecil Street, #09-01Far Eastern Bank BuildingSingapore 069544Telephone: (65) 6222 7733Facsimile: (65) 6224 2718Email: [email protected] Director:David Chan Mun Wai

UOB Life Assurance Limited(a subsidiary)156 Cecil Street, #10-01Far Eastern Bank BuildingSingapore 069544Telephone: (65) 6227 8477Facsimile: (65) 6221 5657Email: [email protected] Director:Raymond Kwok Chong See

Hong Kong S.A.R.

UOB Insurance (H.K.) Limited(a subsidiary)Worldwide House, 16/F19 Des Voeux RoadCentralTelephone: (852) 2867 7988Facsimile: (852) 2810 0218Telex: 74542 ASIAN HXDirector: David Chan Mun Wai

Indonesia

PT UOB Life - Sun Assurance(a subsidiary)Menara BCD, 15th FloorJalan Jend. Sudirman Kav. 26Jakarta 12920Telephone: (62)(21) 250 0888Facsimile: (62)(21) 250 0908

PT UOB Life - Sun Assurance has2 offices in Indonesia.

Investment Management

Singapore

UOB Asset Management Ltd(a wholly-owned subsidiary)80 Raffles Place, 3rd StoreyUOB Plaza 2Singapore 048624Telephone: (65) 6532 7988Facsimile: (65) 6535 5882Email: [email protected] Director &Chief Investment Officer:Daniel Chan Choong Seng

UOB Venture ManagementPrivate Limited(a wholly-owned subsidiary)80 Raffles Place, 30th StoreyUOB Plaza 2Singapore 048624Telephone: (65) 6539 2268Facsimile: (65) 6538 2569Email: [email protected] Director: Quek Cher Teck

China

UOB Investment Consultancy(Beijing) Limited(a subsidiary)Jing Xin Building, 6/FNo. 2 Dong Shan Huan North RoadChaoyang DistrictBeijing 100027Telephone: (86)(10) 6466 0826Facsimile: (86)(10) 8451 3387Email: [email protected] General Manager: Li Zhi Liang



UOB Venture Management(Shanghai) Co., Ltd(a wholly-owned subsidiary)Jin Mao Tower, 31/F88 Century BoulevardPudong New AreaShanghai 200120Telephone: (86)(21) 2890 9677Facsimile: (86)(21) 2890 9288Email: [email protected] General Manager:Tang Boo Teck

SZVC-UOB Venture ManagementCo., Ltd(an associate)Investment Building, No. 400911 Shennan RoadFutian Centre DistrictShenzhenTelephone: (86)(755) 8291 2888Facsimile: (86)(755) 8291 2880Email: [email protected] Manager: Chua Wee Liang

France

UOB Global Capital SARL(a subsidiary)40 rue La Perouse75116 ParisTelephone: (33)(1) 5364 8400Facsimile: (33)(1) 5364 8409Email: [email protected] Director: Michael Landau

Malaysia

UOB-OSK Asset ManagementSdn Bhd(a subsidiary)Menara UOB, Level 13Jalan Raja Laut50350 Kuala LumpurTelephone: (60)(3) 2732 1181Facsimile: (60)(3) 2732 1100Email: [email protected] Executive Officer:Tan Kok Kheng

Taiwan

UOB Investment Advisor(Taiwan) Ltd(a wholly-owned subsidiary)Union Enterprise Plaza, 10th Floor109 Minsheng East RoadSection 3Taipei 105Telephone: (886)(2) 2719 7005Facsimile: (886)(2) 2545 6591Email: [email protected]: Tracy Yin (Ms)

United States of America

UOB Global Capital LLC(a subsidiary)UOB Building592 Fifth AvenueSuite 602, 48th StreetNew York, NY 10036Telephone: (1)(212) 398 6633Facsimile: (1)(212) 398 4030Email: [email protected] Director: David Goss

UOB Venture Management(USA) Inc.(a wholly-owned subsidiary)710 Lakeway Drive, Suite 250Sunnyvale, CaliforniaCA 94086Telephone: (1)(408) 530 1900Facsimile: (1)(408) 530 1919Email: [email protected] Managing Director:Seah Kian Wee

Merchant Banking

Singapore

UOB Asia Limited(a wholly-owned subsidiary)80 Raffles Place, 21st StoreyUOB Plaza 2Singapore 048624Telephone: (65) 6539 3171Facsimile: (65) 6534 0409Email: [email protected] Director:Michael Sng Beng Hock

Australia

UOB Australia Limited(a wholly-owned subsidiary)United Overseas Bank BuildingLevel 9, 32 Martin PlaceSydney, NSW 2000Telephone: (61)(2) 9221 1924Facsimile: (61)(2) 9221 1541Telex: AA 73507 TYHUASWIFT: UOVBAU2SEmail: [email protected] & Regional Head, Australia &New Zealand: Peter MackinlayDirector & General Manager:Kevin Yung Kin Man

Hong Kong S.A.R.

UOB Asia (Hong Kong) Limited(a wholly-owned subsidiary)Aon China BuildingSuite 601, 6/F29 Queen’s RoadCentralTelephone: (852) 2868 2633Facsimile: (852) 2840 0438Email: [email protected] Director:Calfred Yung Wai Kai

Stockbroking

Singapore

UOB-Kay Hian Holdings Limited(an associate)80 Raffles Place, #30-01UOB Plaza 1Singapore 048624Telephone: (65) 6533 2936/6535 6868Facsimile: (65) 6532 6919Telex: RS 24085Website: www.uobkayhian.comManaging Director: Wee Ee Chao

184

Notice of Annual General Meeting

Notice is hereby given that the Sixty-First Annual General Meeting of members of the Company will be held at the Penthouseof the Company, 80 Raffles Place, 61st Storey, UOB Plaza 1, Singapore 048624 on Thursday, 8 May 2003 at 12.00 noon to transactthe following business:

As Ordinary Business

Resolution 1 To receive the Financial Statements, the Directors' Report and the Auditors' Report for the year ended31 December 2002.

Resolution 2 To declare a Final Dividend of 25% less income tax for the year ended 31 December 2002.

Resolution 3 To approve Directors' fees of $658,750 for 2002 (2001: $410,000).

Resolution 4 To re-appoint Messrs PricewaterhouseCoopers as Auditors of the Company and authorise the Directors to fixtheir remuneration.

To re-elect the following Directors:

Resolution 5 Mr Koh Beng Seng.

Resolution 6 Mr Ernest Wong Yuen Weng.

Resolution 7 Mr Philip Yeo Liat Kok.

Resolution 8 Dr Cham Tao Soon.

To pass the following resolution under Section 153(6) of the Companies Act, Cap. 50:

Resolution 9 "THAT pursuant to Section 153(6) of the Companies Act, Cap. 50, Mr Wee Cho Yaw be and is herebyre-appointed as a Director of the Company to hold such office until the next Annual General Meeting ofthe Company."

As Special Business

To consider and, if thought fit, pass the following ordinary resolutions:

Resolution 10 (a) "THAT pursuant to Section 161 of the Companies Act, Cap. 50, approval be and is hereby given to theDirectors to offer and grant options in accordance with the Regulations of the UOB 1999 Share OptionScheme ("the 1999 Scheme") and to allot and issue from time to time such number of shares in theCompany as may be required to be issued pursuant to the exercise of options under the 1999 Scheme andunder the UOB Executives’ Share Option Scheme, provided that the aggregate number of shares to beissued pursuant to this resolution shall not exceed 15 per cent of the issued share capital of the Companyfrom time to time."

Resolution 11 (b) "THAT pursuant to Section 161 of the Companies Act, Cap. 50, approval be and is hereby given to theDirectors to issue shares in the Company at any time and upon such terms and conditions and for suchpurposes as the Directors may, in their absolute discretion, deem fit provided that the aggregate number ofshares to be issued pursuant to this resolution shall not exceed 10 per cent of the issued share capital of theCompany for the time being."


Notes to Resolutions 4, 6, 7, 8, 9, 10 and 11

Resolution 4 – The Audit Committee has nominated Messrs PricewaterhouseCoopers for appointment as the Company's auditorsand Messrs PricewaterhouseCoopers have expressed their willingness to accept re-appointment.

Resolution 6 is to re-elect Mr Ernest Wong Yuen Weng who is an independent member and Chairman of the Audit Committee.

Resolution 7 is to re-elect Mr Philip Yeo Liat Kok who is an independent member of the Audit Committee andRemuneration Committee.

Resolution 8 is to re-elect Dr Cham Tao Soon who is an independent member of the Audit Committee, Nominating Committeeand Remuneration Committee.

Resolution 9 is to re-appoint Mr Wee Cho Yaw. Mr Wee is a non-independent member and Chairman of the RemunerationCommittee, and a non-independent member of the Nominating Committee.

Resolution 10 is to allow the Directors to issue shares pursuant to the UOB 1999 Share Option Scheme ("the 1999 Scheme")which was approved at the Extraordinary General Meeting of the Company on 6 October 1999 and the UOB Executives’ ShareOption Scheme ("ESOS") which was approved at the Extraordinary General Meeting of the Company on 10 February 1990. A copyof the Regulations of the 1999 Scheme and ESOS is available for inspection by shareholders during normal office hours at the Officeof the Company Secretary at 80 Raffles Place, 4th Storey, UOB Plaza 1, Singapore 048624.

Resolution 11 is to enable the Directors to issue shares in the Company (other than on a bonus or rights issue) up to an amountnot exceeding 10 per cent of the issued share capital of the Company for the time being. This approval will expire at the conclusionof the next Annual General Meeting. The Directors would only issue shares under this resolution where they consider it appropriateand in the interest of the Company to do so.

By Order of the Board

Mrs Vivien ChanSecretary

Singapore, 12 April 2003

Notes:1 A member entitled to attend and vote at the Meeting is entitled to appoint a proxy or proxies to attend and vote in his stead. A proxy need not be a

member of the Company.

2 To be effective, the instrument appointing a proxy or proxies must be deposited at the Office of the Company Secretary at 80 Raffles Place, 4th Storey,UOB Plaza 1, Singapore 048624, not less than 48 hours before the time set for holding the Meeting.

I/We (Name)

of (Address)

being (a) member/members of United Overseas Bank Limited (the "Company"), hereby appoint:

Name NRIC/Passport Number Proportion of Shareholdings

No. of Shares %Address

and/or*

Name NRIC/Passport Number Proportion of Shareholdings

No. of Shares %Address

* Please delete as appropriate.

or failing him/her, the Chairman of the Meeting as my/our proxy to attend and to vote for me/us on my/our behalf at theSixty-First Annual General Meeting of the Company to be held at the Penthouse, 80 Raffles Place, 61st Storey, UOB Plaza 1,Singapore 048624 on Thursday, 8 May 2003 at 12.00 noon and at any adjournment thereof.

(Please indicate with an “X” in the space provided how you wish your proxy to vote. In the absence of specific directions, theproxy will vote as the proxy deems fit.)

No. Ordinary Resolutions For Against

1 Financial Statements, Directors' Report and Auditors' Report

2 Final Dividend

3 Directors' Fees

4 Auditors and their Remuneration

5 Re-election (Mr Koh Beng Seng)

6 Re-election (Mr Ernest Wong Yuen Weng)

7 Re-election (Mr Philip Yeo Liat Kok)

8 Re-election (Dr Cham Tao Soon)

9 Re-appointment (Mr Wee Cho Yaw)

10 Authority to Issue Shares (Share Option)

11 Authority to Issue Shares (General)

Dated this _______________ day of _____________________________ 2003

____________________________________________________________

Signature(s) or Common Seal of Shareholder(s)

IMPORTANT: PLEASE READ NOTES OVERLEAF.

Shares in: No. of Shares

(i) Depository Register

(ii) Register of Members

Total

187

IMPORTANT1 For investors who have used their CPF monies to buy shares of United Overseas Bank

Limited, the Annual Report 2002 is forwarded to them at the request of their CPFApproved Nominees and is sent solely FOR INFORMATION ONLY.

2 This Proxy Form is not valid for use by CPF investors and shall be ineffective for allintents and purposes if used or purported to be used by them.

3 CPF investors who wish to vote should contact their CPF Approved Nominees.

Proxy Form

(INCORPORATED IN THE REPUBLIC OF SINGAPORE)

∞

Notes:

1 Please insert the number of shares held by you and registered in your name in the Register of Members and in the Depository Register of TheCentral Depository (Pte) Limited. If no number is inserted, the instrument of proxy will be deemed to relate to all the shares held by you.

2 A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint not more than two proxies toattend and vote instead of him. A proxy need not be a member of the Company.

3 Where a member appoints two proxies, the appointment shall be invalid unless he specifies the proportion of his shareholding (expressed asa percentage of the whole) to be represented by each proxy.

4 The instrument appointing a proxy or proxies must be deposited at the Office of the Company Secretary at 80 Raffles Place, 4th Storey,UOB Plaza 1, Singapore 048624, not less than 48 hours before the time appointed for the Meeting.

5 The instrument appointing a proxy or proxies must be signed under the hand of the appointor or of his attorney duly authorised in writing.Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under its common seal or under thehand of an officer or attorney duly authorised. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney,the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with theinstrument of proxy, failing which the instrument may be treated as invalid.

6 A corporation which is a member may authorise by a resolution of its directors or other governing body such person as it thinks fit to actas its representative at the Meeting, in accordance with its Articles of Association and Section 179 of the Companies Act, Chapter 50of Singapore.

7 The Company shall be entitled to reject the instrument of proxy if it is incomplete, improperly completed or illegible or where the trueintentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument of proxy. In addition, inthe case of shares entered in the Depository Register, the Company may reject any instrument of proxy if the member, being the appointor,is not shown to have shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding theMeeting, as certified by The Central Depository (Pte) Limited to the Company.

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Postage willbe paid byaddressee.

For posting inSingapore only.

BUSINESS REPLY SERVICEPERMIT NO. 07399

The Company SecretaryUnited Overseas Bank Limited

80 Raffles Place, 4th Storey, UOB Plaza 1Singapore 048624

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